In a statement, the central bank said at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects.
“The MPC remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth trajectories. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability,” it said.
BNM last raised the OPR from 2.75% to 3% in May 2023 and has held the benchmark rate steady at seven consecutive MPC meetings since.
The central bank had slashed the OPR to its lowest level ever at 1.75% in July 2020 in the aftermath of the Covid-19 pandemic. BNM subsequently reversed course and hiked the OPR by a cumulative 125 basis points between May 2022 and May 2023.
On the Malaysian economy, BNM said the latest indicators point towards sustained strength in economic activity in the second quarter of 2024, driven by resilient domestic expenditure and better export performance.
“Going forward, exports are expected to be further lifted by the global tech upcycle given Malaysia’s position in the semiconductor supply chain, as well as continued strength in non-electrical and electronics goods. Tourist arrivals and spending are also poised to rise further.”
It said continued employment and wage growth, as well as policy measures, will continue to support household spending.
“Investment activity would be supported by the ongoing progress of multi-year projects in both the private and public sectors, the implementation of catalytic initiatives under the national master plans, as well as the higher realisation of approved investments.”
The growth outlook is subject to downside risks from weaker-than-expected external demand and larger declines in commodity production.
Inflation to trend higher
BNM said both headline and core inflation averaged 1.8% in the first five months of the year. “As expected, inflation will trend higher in the second half of 2024, amid the recent rationalisation of diesel subsidies.
“Nevertheless, the increase in inflation will remain manageable given the mitigation measures to minimise the cost impact on businesses.”
Going forward, it said the upside risk to inflation would be dependent on the extent of spillover effects of further domestic policy measures on subsidies and price controls to broader price trends, as well as global commodity prices and financial market developments.
For the year, headline and core inflation are expected to average within the earlier projected ranges of 2%-3.5% and 2%-3% respectively.
On the ringgit, the central bank said the currency continues to be primarily driven by external factors, namely expectations of major economies’ monetary policy paths and ongoing geopolitical tensions.
It noted the positive impact of the initiatives by the government and BNM with GLCs and government-linked investment companies, as well as corporate engagements which have continued to cushion the pressure on the ringgit.
“BNM will continue to manage risks arising from heightened financial market volatility. Over the medium term, domestic structural reforms will provide more enduring support to the ringgit,” it added.
The MPC’s decision to keep the interest rate steady was widely anticipated. In a recent Bloomberg News survey, all 22 economists predicted BNM would leave the OPR unchanged.