KUALA LUMPUR - Bank Negara Malaysia (BNM) will ensure that the monetary policy stance remains conducive to sustainable domestic economic growth in the long term amid price stability.
In its Annual Report 2023 released today, BNM said foreign exchange and monetary operations will also continue to ensure sufficient liquidity in the foreign exchange, money, and government bond markets.
"They will complement our other policies to ensure the smooth functioning of domestic financial markets and financial intermediation.
"BNM is committed to collaborating closely with our stakeholders on relevant policy measures, especially structural reforms,” it added.
The central bank said these efforts would not only address immediate economic challenges but also enhance Malaysia’s economic resilience in the years ahead.
BNM said that after four consecutive overnight policy rate (OPR) increases in 2022, the Monetary Policy Committee (MPC) decided to keep the OPR unchanged at 2.75 per cent in the January and March 2023 meetings.
The central bank said this allowed the MPC to review the cumulative impact of the 2022 OPR increases on Malaysia's economy as monetary policy changes take some time to fully influence economic activity.
"The assessment showed no signs of excessive tightening in the economy. Rather, the domestic economy continued to expand, with moderating unemployment and continued expansion of household spending.
"Considering all these together amid resilient domestic growth prospects in 2023, the MPC decided to further normalise the OPR, increasing it by 25 basis points at the May meeting," it said.
BNM said the increase brought the OPR to the pre-pandemic level of 3.00 per cent, and with that, the MPC had totally withdrawn the monetary policy stimulus provided during the Covid-19 crisis to support the economic recovery
Based on the ringgit exchange rate in 2023, BNM said it continued to engage large investors and corporates, including exporters, regarding their foreign exchange activities.
The central bank said it also closely monitored the conversion of export proceeds to ringgit by the large resident exporters.
"More recently, the government and BNM have also been taking coordinated actions to encourage government-linked companies and government-linked investment companies to bring back and convert their realised foreign investment income into ringgit more consistently.
"These collective actions will contribute to greater and sustained inflows lending support to a firmer ringgit,” it said.
Meanwhile, BNM’s economic analysis and policy research in 2023 focused on assessing Malaysia’s economic resilience, especially amid external challenges, and further understanding domestic inflation drivers.
"Through a scenario analysis, we assessed how the strength of the recovery in China’s economy might impact Malaysia’s GDP growth due to the close trade ties.
"On inflation, we looked deeper into whether price changes in Malaysia were driven by economy-wide or sector-specific factors, and the different approaches to measuring underlying inflation,” it added.
BNM said that throughout 2023, it continued to closely monitor the impact of past OPR changes on the broader economy, particularly for signs of overtightening that could hinder domestic economic growth.
The central bank also contributed to the formulation of the Public Finance and Fiscal Responsibility Act 2023, which Dewan Negara passed in November 2023. - BERNAMA