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Thursday, September 8, 2022

BNM raises OPR by 25 bps to 2.5%

 

This is the central bank’s third consecutive rate hike.

PETALING JAYA: Bank Negara Malaysia (BNM) has raised the overnight policy rate (OPR) by 25 basis points (bps) to 2.50%.

This is the central bank’s third consecutive rate hike.

In a statement, BNM said that despite continued easing in global supply chain conditions, inflationary pressures have remained high due to elevated commodity prices and tight labour markets.

“Consequently, central banks are expected to continue adjusting their monetary policy settings, some at a faster pace, to reduce inflationary pressures,” it said.

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In May, the central bank raised the OPR to 2% from 1.75%, reportedly the lowest on record, following a 25 bps cut in July 2020. In July, it raised the OPR by another 25 bps to 2.25%.

BNM said headline inflation has averaged at 2.8% year-to-date, and the extent of upward pressures to inflation will remain partly-contained by existing price controls, fuel subsidies, and the prevailing spare capacity in the economy.

“The inflation outlook, however, continues to be subject to domestic policy measures, as well as global commodity price developments arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions,” it said.

“At the current OPR level, the stance of monetary policy continues to remain accommodative and supportive of economic growth.

“The MPC (Monetary Policy Committee) is not on any preset course and will continue to assess evolving conditions and their implications on the overall outlook to domestic inflation and growth.”

BNM said that while the global economy has continued to expand, although at a slower pace, it has been weighed down by rising cost pressures, tighter global financial conditions and strict containment measures in China.

However, global growth continues to be supported by improvements in labour market conditions, and the full reopening of most economies and international borders.

Going forward, the central bank said, global growth is expected to face challenges from the impact of monetary policy tightening in most economies, and pandemic management measures in China.

For the Malaysian economy, the transition to endemicity and policy measures have contributed to the stronger growth performance in the second quarter of 2022, it said.

It added that labour market conditions and income prospects remain positive, with unemployment and underemployment declining further. - FMT

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