Bank Negara Malaysia keeps OPR unchanged at 3.0%

The central bank said the global economy continues to expand amid resilient labour markets in some countries and continued recovery in global trade.

"Looking ahead, global growth is expected to be sustained, as headwinds from tight monetary policy and reduced fiscal support will be cushioned by positive labour market conditions and moderating inflation," it said in a statement today.

BNM said global trade is expected to strengthen further as the global tech upcycle gains momentum.

It said that while global headline and core inflation continued to edge downward in recent months, the disinflation pace has slowed in some advanced economies.

"This increases the prospect of interest rates to remain high for longer, particularly in the United States (US). The growth outlook remains subject to downside risks, mainly from further escalation of geopolitical tensions, higher-than-anticipated inflation outturns, and volatility in global financial markets," it said.

For the Malaysian economy, BNM said, the latest indicators point towards higher economic activity in the first quarter of 2024, driven by resilient domestic expenditure and a positive turnaround in exports.

Moving forward, the recovery in exports is expected to gather momentum supported by the global tech upcycle and continued strength in non-electrical and electronics goods, it said.

Tourist arrivals and spending are also poised to rise further, while continued employment and wage growth remain supportive of household spending, the central bank said.

"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 approved investments," it said.

BNM said the growth outlook is subject to downside risks from weaker-than-expected external demand, and larger declines in commodity production.

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 project, it added.

Headline and core inflation averaged 1.7 per cent and 1.8 per cent, respectively, in the first quarter of 2024.

Looking forward, BNM said inflation in 2024 is expected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures.

"The outlook for the rest of the year is dependent on the implementation of domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments," it said.

After incorporating the potential impact of subsidy rationalisation, BNM forecast headline inflation to average between 2.0 per cent and 3.5 per cent for the year and core inflation to average between 2.0 per cent and 3.0 per cent.

On the ringgit, it said the local note currently does not reflect Malaysia's economic fundamentals and growth prospects.

"External factors, namely shifting expectations of major economies' monetary policy paths and ongoing geopolitical tensions, have led to heightened volatility in both capital flows and exchange rates across the region, including the ringgit," it said.

The coordinated initiatives by the government and BNM with the government-linked companies and government-linked investment companies as well as corporate engagements have gained further traction, cushioning the pressure on the ringgit.

"BNM will continue to manage risks arising from heightened financial market volatility. Over the medium term, domestic 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.

According to the statement, the MPC remains vigilant to ongoing developments to inform the assessment of the outlook of domestic inflation and growth.

"The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," it added.

-- BERNAMA