Malaysia's economic growth is supported by the current OPR

After Bank Negara Malaysia’s decision to maintain the Overnight Policy Rate at current levels, analysts say it was within expectations. They add that it is also supportive of Malaysia’s economic growth.

BNM decided to keep the OPR unchanged at 1.75% in its second Monetary Policy Meeting of 2022, in line with analysts and market’s expectations.

MIDF says the current rate is deemed to be appropriate and supportive of Malaysia’s economic growth.

In the Monetary Policy Statement, BNM highlighted that the growth momentum is expected to improve in 2022. It is underpinned by expansion of global demand, higher private expenditure, improvements in labour market and continued targeted policy support.

Reopening of international borders will add further support for the economy.Cautious optimism upward path. In terms of growth outlook, BNM expects growth momentum trajectory to remain on track.

Malaysia and global supply chains

Global demand to continue improve amid more countries entering endemic phase. While growth outlook improves, BNM says its concerns on the downside risks includes the military conflict in Ukraine.

It believes they are key risks to global growth, trade flows, commodity prices and financial market conditions.

Global supply chain disruptions and normalisation of monetary policies will contribute extra pressures on global growth. 2HCY22 is the ideal time for the first rate hike post-pandemic.

“We believe the current focus of BNM’s monetary policy setting is to ensure a sustainable recovery of Malaysia’s economy.

“With the rate of inflation hovering within BNM’s forecast, we opine there is less pressure for BNM to quickly shift towards policy tightening.

“At this point, we expect the policy normalisation will likely be carried out in the second half of 2022 possibly 3QCY22,” says MIDF.