BNM keeps OPR at 3.25%, says positive growth expected to be sustained

KUALA LUMPUR (July 11): Bank Negara Malaysia (BNM) has maintained the overnight policy rate (OPR) at 3.25% as the country's positive growth performance is expected to be sustained, driven by both domestic and external demand.

The central bank said at the current level of the OPR, the degree of monetary accommodativeness is consistent with the intended policy stance.

"The Malaysian economy continued to expand in the first half of 2018, supported by private sector activity with additional impetus from net exports. The positive growth performance is expected to be sustained, driven by both domestic and external demand," BNM said in a statement issued after a meeting of the Monetary Policy Committee.

Private consumption will be underpinned by continued wage and employment growth, with an additional lift from higher household spending due to the tax holiday.

Investment activity is projected to be supported by capacity expansion, especially by the export-oriented industries and ongoing infrastructure projects, particularly in the transport and utilities sub-sectors.

"The external sector will continue to benefit from the sustained global growth momentum. The growth outlook will be further supported with greater certainty in domestic policy in the coming months," said BNM.

The central bank said domestic financial markets have remained resilient despite non-resident portfolio outflows.

"The ringgit exchange rate would be more reflective of the underlying fundamentals of the economy when the external and domestic uncertainties recede. Notwithstanding the heightened financial market volatility, the domestic monetary and financial conditions remain supportive of economic growth," it said.

Additionally, it said headline inflation for 2018 is projected to be lower than earlier forecast after taking into consideration the impact of recent policy measures on domestic cost factors.

The impact of these measures on inflation, however, is transitory.

"Headline inflation is likely to turn negative in some months and remain low in the first half of 2019 before trending upwards as these transitory effects lapse. Core inflation is nevertheless expected to remain relatively stable in line with sustained domestic demand," said BNM.