BNM's OPR Hold Signals Positive Outlook For Investment Growth - Economists

By Harizah Hanim Mohamed

KUALA LUMPUR, Nov 6 (Bernama) -- Bank Negara Malaysia’s (BNM) decision to maintain the overnight policy rate at 3.00 per cent at its final Monetary Policy Committee (MPC) meeting of the year reflects the central bank’s support for domestic economic growth.

This also aligns with the government’s direction in attracting investors, particularly foreign direct investments, said University Utara Malaysia, School of Economics, Finance and Banking, senior lecturer Muhammad Ridhuan Bos Abdullah.

“With the monetary policy base, which is the OPR at a rate of 3.0 per cent, and the fiscal expansion policy through the government’s supply-side policy, both are sufficient as buffers for domestic economic growth,” he told Bernama when contacted today.

Asked about the divergent interest rates in Asia and aggressive monetary policies globally, Mohd Ridhuan emphasised that the current level of three per cent remains attractive for Malaysia’s manufacturing sector, including oil and gas, and is especially appealing to portfolio investors.

On inflation, he pointed out that the current OPR level is sufficient to curb the country’s inflation rate, which stood below 2.00 per cent.

 “The maintained OPR supports domestic economic growth, and if the OPR is increased, it could lead to a reduction in investment, which would subsequently impact the labour market,” said Muhammad Ridhuan. 

He also said that the country’s labour market needs support from domestic investment and that monetary policy is crucial for building investor confidence to increase investments or inventories.

Meanwhile, renowned economist Geoffrey Williams said that the decision to hold the OPR at 3.00 per cent is expected and it is the right decision.

“Headline inflation will be around two per cent for the year at the low end of the forecast. Economic growth will be around five per cent at the high end of the forecast and the financial system is sound,” he said.

About the ringgit, Williams highlighted that the ringgit has strengthened but is subject to volatility due to international events which are outside of the control of Malaysian policymakers.

“Nonetheless, BNM can make policy interventions other than changing interest rates to manage that. So, the economy is in good shape and there is no need to change the monetary policy for the foreseeable future,” he said.

Meanwhile, OCBC Global Markets Research said BNM is expected to keep its policy rate unchanged at 3.00 per cent in 2025.

“That said, BNM is likely to remain vigilant of second-round inflationary pressures,” it said in a note today.

OCBC said that BNM’s outlook for Malaysia’s economic prospects remained positive, broadly consistent with OCBC’s assessment.

“We forecast the gross domestic product growth in 2024 and 2025 to record 5.0 per cent and 4.5 per cent, respectively,” it said.

BNM’s MPC decided to maintain the OPR at 3.00 per cent today, highlighting that the global economy continues to expand amid resilient labour markets and continued recovery in global trade. 

The central bank noted that Budget 2025 measures will provide additional support to growth and it expects exports to be supported by the global tech upcycle, as well as the implementation of catalytic initiatives under the national master plans.

The recent MPC meeting marked the final session of the year. During this meeting, the schedule for six MPC meetings in 2025 was approved.

These meetings are set to take place on January 22, March 6, May 8, July 9, September 5, and November 6, in accordance with the Central Bank of Malaysia Act 2009.

-- BERNAMA