KUALA LUMPUR - Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) has decided to maintain the Overnight Policy Rate (OPR) at 3.00 per cent at its meeting today.
BNM said the global economy continues to expand albeit moderately, supported by domestic demand amid improvement in trade activity, and favourable labour market conditions in some countries continue to support consumption activity.
"Looking ahead, growth in regional economies is expected to improve, while China's growth would likely remain modest given continued weakness in the property market," the central bank said in a statement today.
It said global trade is expected to strengthen as the global tech upcycle gains momentum.
BNM also said the global headline and core inflation edged downwards in recent months with prospects of monetary easing in some countries in the second half of the year.
Nonetheless, it said, the global monetary policy stance is likely to remain tight in the near term as inflation remains above average.
Meanwhile, the growth outlook remains subject to downside risks, mainly from an escalation of geopolitical tensions, higher-than-anticipated inflation outturns and volatility in global financial markets.
Moving forward, the central bank said growth is expected to improve in 2024, driven by the recovery in exports and resilient domestic expenditure, with export growth turning positive after contracting since March 2023 and will continue to be supported by stronger global trade.
Other than that, BNM explained that tourist arrivals and spending were poised to rise further, while continued employment and wage growth remain supportive of 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 investments.
"The growth outlook is subject to downside risks stemming from weaker-than-expected external demand and larger declines in commodity production," it said.
Meanwhile, upside risks to growth mainly emanate from greater spillover from the tech upcycle, more robust tourism activity and faster implementation of existing and new projects.
As for headline and core inflation, the central bank said it stood at 1.5 per cent and 1.8 per cent respectively in January 2024, trending in line with expectations.
It said inflation in 2024 is expected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures.
"However, this outlook continues to be highly dependent on the implementation of domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments," it pointed out.
On the ringgit, BNM said the local note is currently undervalued, given Malaysia's economic fundamentals and growth prospects.
"The government and BNM are taking coordinated actions to encourage repatriation and conversion of foreign investment income by government-linked companies (GLCs) and government-linked investment companies (GLICs).
"These actions are contributing to greater inflows, lending support to a firmer ringgit. Over the medium term, ongoing structural reforms will provide more enduring support to the ringgit," it said.
At the current OPR level, it noted that the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.
"The MPC remains vigilant to ongoing developments to inform the assessment on the outlook of domestic inflation and growth, and will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," the central bank added. - BERNAMA