The overnight policy rate (OPR) remained at 1.75% as a result of the final meeting of the Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) held on Wednesday (Nov 3).
The decision was made after taking into account the uncertain economic growth prospects on a number of external and domestic factors coupled with concerns over the spread of the Covid-19 pandemic and the country’s inflation expectations which remained modest by the central bank.
BNM said economic activity weakened in the third quarter as the country was busy curbing the resurgence of the Covid-19 case but with the easing of sanctions held in June had a positive impact on the country's economic activity recovery.
By 2022, BNM expects better growth momentum supported by expansion in global demand, higher private sector spending and continued policy support.
BNM's preliminary assessment found that the average range of key inflation projections was between 2% and 3% for 2021, an average of 2.3% this year. Base inflation as measured by core inflation is expected to average below 1% this year.
Entering 2022, key inflation projections remain modest. Once economic activity returns to normal core inflation is expected to increase but remain passive due to continued replacement capacity in the economy and a downturn in the labor market.
The central bank announced that the MPC considered the monetary policy stance to be reasonable and accommodative.
He added that they will initiate fiscal measures to curb the economic impact on businesses and households as well as provide support to economic activities.
Meanwhile, BNM said although the global economy was in a process of recovery driven by expansion in the manufacturing and services sectors, risks to the global economic growth prospects remained subdued.
This is due to the alarming emergence of the Covid-19 variant, the risk of prolonged global supply chain disruption as well as the potential risk of increased financial market volatility amid adjustments to monetary policy in major economies.
According to BNM data the OPR rate of 1.75% is the lowest rate ever recorded since it was maintained on 7 July 2020.
