In a statement today, 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 the inflation and growth prospects.
“The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
“For the Malaysian economy, the fourth quarter advance estimates for the gross domestic product affirmed that the overall growth for 2023 expanded within expectations. Moving forward, growth is expected to improve in 2024, supported by the recovery in exports and resilient domestic expenditure,” it said.
BNM said both headline and core inflation continued to moderate in the fourth quarter, mainly due to lower cost pressures amid stabilising demand conditions. Overall, both headline and core inflation for 2023 are within expectations, averaging for the year at 2.5% and 3%, respectively, it added.
“In 2024, inflation is expected to remain modest, broadly reflecting stable cost and demand conditions. Risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.
“Of note, the government’s intention to review price controls and subsidies in 2024 will affect the outlook for inflation and demand conditions,” it said.
BNM said continued employment and wage growth remain supportive of household spending, and tourist arrivals and spending are expected to improve further.
Investment activity would be supported by continued progress of multi-year projects in both the private and public sectors, and implementation of catalytic initiatives under the national master plan, it added.
However, it said the growth outlook remains subject to downside risks stemming from weaker-than-expected external demand and larger declines in commodity production.
Meanwhile, upside risks to growth mainly emanate from greater spillover from the tech upcycle, stronger-than-expected tourism activity and faster implementation of existing and new projects.
BNM last raised the OPR, from 2.75% to 3%, in May last year, citing the need to “normalise monetary accommodation” in the face of a resilient economy as well as the need to manage persistent inflation.
The central bank had slashed the OPR to 1.75%, its lowest ever, in July 2020 in the aftermath of the Covid-19 pandemic. BNM subsequently hiked the OPR by a cumulative 125 basis points between May 2022 and May 2023.
BNM’s decision today to hold the interest rate steady was widely expected by economists and analysts.
All 28 economists in a recent Reuters poll predicted BNM would keep its key interest rate at 3%, for the fourth consecutive MPC meeting.
They expect BNM to hold it there until at least the end of 2025 as price pressures are expected to increase and growth remains steady.