Bank Negara Maintains OPR at 3% – No Changes Expected in Hire Purchase Interest Rates.
After a meeting on September 5, 2024, Bank Negara Malaysia (BNM) decided to keep the Overnight Policy Rate (OPR) at 3%, just like it did in July. The rate has stayed at 3% since it was raised from 2.75% in May 2023.
The OPR affects the cost of borrowing money from banks, meaning that when it's higher, loans become more expensive. This could make it harder for people to afford things like car loans (which are usually hire purchase).
BNM said keeping the OPR at 3% helps support the economy and matches its view on inflation and growth. The central bank is keeping an eye on the economy and will review these factors as 2025 nears. The next meeting to discuss the OPR is on November 5-6.
Monetary Policy Statement - September 2024
At its recent meeting, Bank Negara Malaysia’s Monetary Policy Committee (MPC) decided to keep the Overnight Policy Rate (OPR) at 3%.
Globally, the economy continues to grow, supported by strong labor markets and a steady recovery in trade. Looking ahead, global growth is expected to benefit from stable employment, easing inflation, and less restrictive monetary policies. The recovery in global trade should persist, driven by demand for both electrical & electronics (E&E) and non-E&E products. However, risks to growth remain, particularly from escalating geopolitical tensions, financial market volatility, and slower growth in major economies.
The Malaysian economy grew by 5.1% in the first half of 2024. Indicators show continued strength, driven by solid domestic spending and higher exports. Going forward, exports are expected to be boosted by Malaysia’s role in the global semiconductor supply chain and strong demand for non-E&E goods. Tourism spending is also anticipated to rise. Household spending will be supported by employment and wage growth, along with policy measures. Investment activities are expected to stay strong due to ongoing multi-year projects in both the private and public sectors, and initiatives under national master plans. The rise in imports of intermediate and capital goods will further enhance export and investment activities. However, risks to growth include weaker-than-expected external demand and lower commodity production, while upside risks come from stronger tech sector growth, increased tourism, and faster execution of investment projects.
Inflation, both headline and core, averaged 1.8% in the first half of 2024. The impact of the diesel price adjustment on overall prices has been well-contained due to effective policies that minimized cost effects on businesses. For the year, inflation is expected to remain within projected levels, likely staying below 3%. However, inflation could still be influenced by domestic policy changes, particularly regarding subsidies and price controls, as well as global commodity prices and financial market shifts.
The recent recovery of the ringgit is attributed to expectations of lower interest rates in major economies, especially the U.S, along with Malaysia’s strong economic performance. Looking ahead, Malaysia’s positive economic outlook, along with structural reforms and initiatives to encourage capital inflows, should continue to support the ringgit.
At the current OPR of 3%, the monetary policy remains supportive of economic growth and in line with inflation and growth forecasts. The MPC will stay alert to developments affecting inflation and growth as it plans for 2025, ensuring that the policy remains favorable for sustainable economic growth and stable prices.
11 Sep 2024
