Malaysia central bank keeps rates on hold as inflation, growth cool
KUALA LUMPUR: The central bank of Malaysia decided to maintain its benchmark interest rate at the same level for the second consecutive meeting, as there has been a decrease in both economic growth and inflation.
Bank Negara Malaysia (BNM) kept its overnight policy rate (OPR) unchanged at 3.00 percent, as anticipated by the market, after surprising everyone with a rate increase in May.
The statement from the central bank mentioned that the current level of the OPR continues to provide assistance to the economy and aligns with the present evaluation of inflation and growth possibilities.
In 2022, the economy of the Southeast Asian nation experienced a significant growth rate of 8.7%, the highest in over two decades, after the easing of COVID-19 restrictions. However, this year, the economic growth has decelerated considerably due to sluggish exports.
According to Mohd Afzanizam Abdul Rashid, the top economist at Bank Muamalat Malaysia, BNM has taken a more lenient approach since its declaration in July. During that time, it referred to its policy standpoint as "somewhat accommodating".
He anticipates that the Official Policy Rate (OPR) will remain unchanged at 3.00 percent throughout the year 2023.
Every single one of the 27 economists surveyed by Reuters had predicted that Bank Negara Malaysia (BNM) would keep the benchmark rate steady, with the majority of them foreseeing no alterations until the year's conclusion.
The central bank of Malaysia, known as BNM, has stated that the potential for growth in the country might be influenced by the potential risks of a decrease in external demand that is lower than anticipated. However, BNM also mentioned that there are several factors that could provide a lift to the economy, including an increase in tourism, a revival in the electrical and electronic goods industry, and the quicker execution of both ongoing and new projects.
According to a statement from BNM, both headline and core inflation have also decreased and are predicted to continue declining in the latter part of the year.
The main bank predicts that the overall increase in prices will range from 2.8 percent to 3.8 percent in 2023, in comparison to the 3.3 percent recorded in the previous year.
The second quarter witnessed a modest 2.9% expansion in the economy, which is the slowest rate seen in almost two years. Additionally, the central bank cautioned last month that growth for the entire year is expected to fall within the lower range of their initial projection of 4% to 5%.
