2 days Ago By DIYANA ISAMUDIN
KUALA LUMPUR: Economists have lauded Bank Negara Malaysia's decision to hold the Overnight Policy Rate (OPR) steady at 3.0 per cent, affirming that maintaining the current rate is crucial for supporting the economy.They said this reflects the central bank's focus on controlling price increases, particularly in how policy shifts impact inflation trends for the rest of the year.
"Keeping the OPR at 3.0 per cent appears to be right measure at the moment to support the economy," said Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid."Stability in the OPR ensures consistent borrowing costs.
To some extent, this predictability can drive economic growth as it boosts confidence among businesses and households, potentially leading to increased domestic spending," he told Business Times.UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said Bank Negara kept the OPR at 3.0 per cent as expected, as a stable interest rate environment fosters economic growth by giving businesses and consumers more certainty in financial planning and credit access.
He said steady borrowing costs help sustain capital investment, reduce volatility in household debt servicing and maintain a balanced approach between growth and inflation control."Given Malaysia's high trade exposure, maintaining a predictable interest rate trajectory also reduces exchange rate volatility, which is crucial in preserving investor confidence and mitigating imported inflationary pressures," he noted. Mohd Sedek also cautioned that external challenges, such as trade tensions between the US and major economies like China, continue to pose risks.
He said an unchanged OPR allows for the continued transmission of previous policy adjustments while ensuring inflation expectations remain anchored without introducing undue financial tightening. "The last adjustment to the OPR was on May 3, 2023, when Bank Negara raised the rate by 25 basis points to its current level of 3.0 per cent.
"Maintaining this stance enables policymakers to assess evolving macroeconomic conditions before any recalibration of monetary policy," he added.Meanwhile, Afzanizam said Bank Negara would consider raising the OPR only if inflation intensifies, particularly when economic demand remains robust. "Should the Bank Negara decide on an OPR hike, it would be due to higher inflation, especially when the demand is strong.
If they decide to cut, that could be due to a severe slowdown in the economy," he added.Bank Negara maintained the overnight policy rate (OPR) at 3.0 per cent for 11 consecutive meetings, since May 2023.
The decision to maintain the benchmark rate for the country's loan and deposit rates was made during the central bank's second Monetary Policy Committee (MPC) meeting of the year.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 inflation and growth prospects. "The MPC remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth outlook.
"The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," Bank Negara added.It anticipates the global economy in 2025 to be sustained by positive labour market conditions, moderating inflation and less restrictive monetary policy.The central bank, however, said that the outlook for global growth, inflation and trade is subject to considerable uncertainties surrounding tariff and other policies from major economies and geopolitical developments.
Meanwhile, UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said Bank Negara kept the OPR at 3.0 per cent as expected, since a stable interest rate environment supports economic expansion by providing businesses and consumers with greater certainty in financial planning and credit accessibility. He added that stability in borrowing costs sustains capital investment, mitigates excessive volatility in household debt servicing, and ensures an optimal balance between growth and inflation control.
"Given Malaysia's high trade exposure, maintaining a predictable interest rate trajectory also reduces exchange rate volatility, which is crucial in preserving investor confidence and mitigating imported inflationary pressures," he noted. Moreover, Mohd Sedek said that external headwinds stemming from trade tensions between the US and key economies such as China persist. He said an unchanged OPR allows for the continued transmission of previous policy adjustments while ensuring inflation expectations remain anchored without introducing undue financial tightening.
"The last adjustment to the OPR was on May 3, 2023, when Bank Negara raised the rate by 25 basis points to its current level of 3.00 per cent. "Maintaining this stance enables policymakers to assess evolving macroeconomic conditions before any recalibration of monetary policy," he added.
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