Bank Negara Malaysia (BNM) has kept the Overnight Policy Rate (OPR) unchanged at 1.75% as Malaysia’s latest indicators point to continued consumer spending and improvements in external demand.
The central bank noted that while the containment measures’ re-imposition may affect first quarter (Q1 2021) growth, it expects the impact to be less severe than that seen in Q2 2020, reported The Borneo Post.
“Going forward, growth is projected to improve from the second quarter onwards, driven by the recovery in global demand, increased public and private sector expenditure amid continued support from policy measures and more targeted containment measures,” it said.
“Growth will also be supported by higher production from existing and new manufacturing facilities, particularly in the E&E and primary-related sub-sectors, as well as oil and gas facilities. The roll-out of the domestic COVID-19 vaccine programme will also lift sentiments and economic activity.”
However, it believes that the growth outlook will continue to be subject to downside risks, mainly stemming from “ongoing uncertainties in developments related to the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically”.
BNM expects headline inflation for this year to average higher, due to higher global oil prices. It sees headline inflation temporarily increasing in Q2 2021 on lower base from the low domestic fuel prices during the corresponding quarter last year, before moderating thereafter.
“Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments,” said BNM.
Meanwhile, the Monetary Policy Committee (MPC) considered the stance of monetary policy to be accommodative and appropriate.
Considering the uncertainties surrounding the COVID-19 pandemic, the monetary policy stance going forward will be determined by new data and information as well as their implication on the overall outlook for domestic growth and inflation.
The central bank said it remains committed to use its policy levels where appropriate to foster enabling conditions for a sustainable economic recovery.