At its meeting today, Bank Negara Malaysia’s Monetary Policy Committee (MPC) announced its decision to maintain the Overnight Policy Rate (OPR) at 3.00 percent. This decision comes amidst a backdrop of a moderately expanding global economy supported by domestic demand and improving trade activity.

Globally, economic expansion persists, driven by domestic demand and favorable labor market conditions in certain regions. However, risks such as geopolitical tensions, inflation outturns, and financial market volatility remain pertinent. While global headline and core inflation have seen a slight decline, monetary policy in many countries is expected to remain tight due to above-average inflation.

In Malaysia, the economy saw a 3.7% expansion in 2023, with growth expected to improve in 2024. This positive outlook is attributed to the recovery in exports, resilient domestic expenditure, and stronger global trade. Factors such as tourism growth, employment stability, and investment activities further contribute to the optimistic forecast. Nevertheless, downside risks persist, including weaker external demand and commodity production declines.

Inflation in Malaysia stood at 1.5% and 1.8% for headline and core respectively in January 2024, aligning with expectations. The outlook for 2024 remains moderate, contingent on domestic policy implementations, global commodity prices, and financial market dynamics.

Addressing the currency valuation, Bank Negara Malaysia highlighted the ringgit’s undervaluation relative to economic fundamentals. Coordinated efforts between the government and the central bank aim to encourage the repatriation and conversion of foreign investment income, contributing to a firmer ringgit. Structural reforms in the medium term are expected to provide lasting support to the currency.

The MPC emphasized that the current OPR level is supportive of the economy and aligns with inflation and growth projections. Vigilance towards ongoing developments will guide future assessments on inflation and growth outlooks, ensuring that monetary policy remains conducive to sustainable economic growth and price stability.

Overall, Bank Negara Malaysia’s decision to maintain the OPR reflects a balanced approach to sustain economic momentum amidst global uncertainties, while also addressing domestic economic fundamentals and policy considerations.