Bank Negara keeps benchmark interest rate


PETALING JAYA: Bank Negara has stored its in a single day coverage rate (OPR) unchanged on the record-low stage of 1.75% amid a extra optimistic financial outlook and a reasonable inflation expectation for 2022.

This was in keeping with what the market was anticipating with polls by Bloomberg and Reuters anticipating the central financial institution to keep up the benchmark interest rate.

In justifying its determination to retain the OPR, the Monetary Policy Committee (MPC) of Bank Negara mentioned the present stance of financial coverage is taken into account to be acceptable and accommodative.

“Fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity.

“The stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for inflation and domestic growth,” the MPC mentioned in an announcement.

The committee had its first assembly for the 12 months yesterday. The subsequent assembly is scheduled for March 3.

Bank Negara mentioned the most recent high-frequency indicators confirmed that financial exercise had rebounded within the fourth quarter of 2021.

It is optimistic that the Malaysian economic system would broaden by 3% to 4% in 2021, as guided earlier by the federal government.

As for 2022, the central financial institution expects progress to achieve additional momentum, though it cautioned that the dangers to the outlook stay tilted to the draw back.

“This (growth) will be driven by the expansion in global demand and higher private sector expenditure amid improvements in the labour market and continued policy support.

“Risks may arise from a weaker-than-expected global growth, a worsening in supply chain disruptions, and the emergence of severe and vaccine-resistant Covid-19 variants of concern,” it mentioned in an announcement yesterday.

Beyond Malaysia, Bank Negara famous that the worldwide economic system continues to recuperate, supported by manufacturing and commerce exercise. Labour market situations have additionally improved in lots of international locations.

However, a number of international locations reintroduced measures to curb the continued Covid-19 resurgences, inflicting some moderation within the tempo of restoration in home exercise, particularly providers.

On headline inflation, Bank Negara anticipates it to possible stay reasonable in 2022, as the bottom impact from gas inflation dissipates.

“Underlying inflation, as measured by core inflation, is expected to edge upwards as economic activity normalises amid the environment of high input costs.

“Nevertheless, core inflation is expected to be modest, with upside risk contained by the continued slack in the economy and labour market.

“The outlook, however, continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions,” it mentioned.

As for the January-November 2021 interval, Bank Negara famous that the nation’s headline inflation averaged 2.3%.

While the central financial institution has retained the OPR, Socio-Economic Research Centre (SERC) govt director Lee Heng Guie believes the coverage rate could be raised twice later this 12 months.

There must be a stability between supporting progress and maintaining a lid on inflation, he mentioned.

“If you don’t do so now to contain inflation, it could go higher and impact on economic recovery.

“Bank Negara would need to consider taking small steps now if economic conditions permit, probably in the second and third quarter.

“While we expect domestic demand to drive Malaysia’s economic growth, external headwinds are still a concern,” he informed StarBiz yesterday.

Meanwhile, MIDF Research anticipates Bank Negara to undertake its first rate hike within the second half of this 12 months.

It mentioned the central financial institution’s present deal with financial coverage setting is to make sure a sustainable restoration of Malaysia’s economic system, particularly popping out from the lengthy containment measures imposed final 12 months.

With the rate of inflation hovering inside Bank Negara’s forecast, MIDF Research opined there’s much less stress for the central financial institution to shortly shift in the direction of coverage tightening.

“However, the decision (to hike rates) will be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.

“From a medium-term perspective, the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as the persistently high inflation and a further rise in household indebtedness,” it mentioned in a be aware yesterday.

On Bank Negara’s determination to keep up the OPR till the subsequent MPC assembly, MIDF Research described the transfer as “appropriate” to supply help to nation’s financial restoration.

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