Overnight Policy Rate OPR raised to 3.25 percent in Malaysia

Bank Negara Malaysia has raised the Overnight Policy Rate (OPR) by 25 basis points to 3.25 per cent as expected by the market which has been hot topic recently.

The floor and ceiling rates corridor for the Overnight Policy Rate OPR are correspondingly raised to 3.00 per cent and 3.50 per cent respectively.

The Monetary Policy Committee said the adjustment in the monetary policy, after standing pat at 3.00 per cent for three years, was being done amid firm growth prospects and with the above-average inflation level.

It said the normalisation of monetary conditions also aims to check on the financial imbalances that could undermine the growth prospects of the Malaysian economy.

“At the new level of the OPR, the stance of monetary policy remains supportive of the economy. “

In its latest analysis, the central bank described the prospects for the Malaysian economy to remain firmly on a steady growth path.

As to inflationary pressures, it said inflation has been relatively stable as the effects of the price adjustments for utilities and energy continue to moderate.

Demand driven inflation remains contained.

“Looking ahead, inflation is, however, expected to remain above its long-run average due to the higher domestic cost factors.”

Below is the Monetary Policy Statement from  Bank Negara Malaysia (Central Bank Of Malaysia)

Monetary Policy Statement

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) by 25 basis points to 3.25 percent. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 3.00 percent and 3.50 percent respectively.

After moderating in the first quarter, the global economy has resumed its path of gradual recovery. Economic activity in the major advanced economies continues to expand at a modest pace. In Asia, the better external environment is supporting growth amid continued expansion in domestic demand. In this environment, international financial markets have remained relatively stable.

For Malaysia, latest indicators point to continued strength in exports and private sector activity. Going forward, the overall growth momentum is expected to be sustained. Exports will continue to benefit from the recovery in the advanced economies and from regional demand. Investment activity is projected to remain robust, led by the private sector. Private consumption will be supported by stable income growth and favourable labour market conditions. The prospects are therefore for the Malaysian economy to remain firmly on a steady growth path.

Inflation has been relatively stable as the effects of the price adjustments for utilities and energy continue to moderate. Demand driven inflation remains contained. Looking ahead, inflation is, however, expected to remain above its long-run average due to the higher domestic cost factors.

Amid the firm growth prospects and with inflation remaining above its long-run average, the MPC decided to adjust the degree of monetary accommodation. This normalisation of monetary conditions also aims to mitigate the risk of broader economic and financial imbalances that could undermine the growth prospects of the Malaysian economy. At the new level of the OPR, the stance of monetary policy remains supportive of the economy.

Further review of the degree of monetary accommodation will depend on the MPC’s assessment of the balance of risks surrounding the outlook for domestic growth and inflation.  At the same time, the MPC will also continue to monitor for risks of destabilising financial imbalances.

Bank Negara Malaysia
10 July 2014