Bank Negara keeps OPR at 3.25%, expects strong economic growth in 2018

  • Economy
  • Wednesday, 07 Mar 2018

The Asian Development Bank (ADB) is maintaining its economic growth outlook for Malaysia at 5.3% for 2018 and at 5% for 2019.

KUALA LUMPUR: The Monetary Policy Committee (MPC) of Bank Negara Malaysia has  decided to maintain the Overnight Policy Rate (OPR) at 3.25%. 

It said on Wednesday at the current level of the OPR, the degree of monetary accommodativeness was consistent with the policy stance to ensure the domestic economy continues on a steady growth path amid lower inflation. 

The last time it raised the OPR was in January when it increased it by 25 basis points to 3.25%.

Bank Negara said the strong growth performance in the fourth quarter of 2017 continued to be anchored by private sector spending. 

“Looking ahead, growth prospects will be sustained by the positive global growth outlook and spillovers from the external sector to the domestic economy. 

“Domestic demand will remain the key driver of growth, underpinned by favourable income and labour market conditions, spending on new and ongoing infrastructure projects and sustained capital investment by firms in the manufacturing and services sectors,” it said. 

As for inflation, Bank Negara projects it to average lower in 2018, on expectations of a smaller effect from global cost factors. 

It cited that a s stronger ringgit exchange rate compared to 2017 will mitigate import costs. 

While global energy and commodity prices are expected to trend higher in 2018, Bank Negara said the increase would be at a more moderate pace relative to the previous year. 

“However, the trajectory of headline inflation will be dependent on future global oil prices which remain highly uncertain. 

“Underlying inflation, as measured by core inflation, is also projected to moderate due to improving labour productivity and ongoing investments for capacity expansion,” it said.

On the domestic financial markets, Bank Negara said it had been resilient. 

“The broad appreciation of the ringgit in the past year better reflects the economic fundamentals. 

“Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. The growth of financing to the private sector has been sustained and is supportive of economic activity,” it said.

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