Malaysia raises overnight policy rate to 3%

Kuala Lumpur (VNA) – The Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points (bps) to 3% on May 3, the sixth increase since January 2022.

The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 3.25% and 2.75% respectively, BNM said, noting it believes the global economy continues to be driven by resilient domestic demand.

Most central banks are likely to remain in a tight monetary policy stance, it said, given that core inflation has persisted above historical averages despite moderating headline inflation.

The global growth outlook remains subject to downside risks, mainly from an escalation of geopolitical tensions, higher-than-anticipated inflation outturns, and a sharp tightening in financial market conditions including from further stress in the banking sector, BNM said.

Back to the domestic front, BNM said the latest developments point towards further expansion in economic activity in the first quarter of 2023 after the strong performance in 2022.

Domestic financial conditions also remain conducive to financial intermediation, with no signs of excessive tightening affecting consumption and investment activities. Risks to the domestic growth outlook are relatively balanced.

Upside risks mainly emanate from domestic factors such as stronger-than-expected tourism activity and implementation of projects, including those from the re-tabled Budget 2023, while downside risks stem from weaker-than-expected global growth and more volatile global financial market conditions, it added.

In 2022, the banked increased the Overnight Policy Rate four times, from 1.75% to 2.75%./.