Malaysia: BNM kept the steady hand once again – UOB

Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting assess the latest BNM event.

Key Quotes

“As widely expected, Bank Negara Malaysia (BNM) maintained a status quo on the overnight policy rate (OPR, at 1.75%) for the sixth straight meeting today (8 Jul). It reiterated that the current level of interest rate remains appropriate and accommodative amid persistent downside risks to the growth outlook.”

“Today’s decision came as BNM believes that all fiscal and financial measures unveiled to date will continue to cushion the impact of stricter nationwide lockdown imposed since mid-May on the economy amid positive progress on the national immunisation programme and further improvement in the global economy. With downside risks to the near-term growth outlook associated with the stringency and duration of containment measures, BNM also highlighted that higher adaptability to remote work, automation and digitalisation will partly mitigate the impact of restrictions. The central bank is also seen to be not as concerned about the transitory inflationary pressure, which it projects to moderate in the near term as the base effect dissipates.”

“Overall, BNM continues to leave the door open, citing that the future stance of monetary policy will remain data dependent given the uncertainties surrounding the pandemic. However, we still see limited room for further monetary policy easing given Fed’s hawkish shift, other central banks’ readiness to normalise their monetary policy, and global inflation keeps creeping up. There is also a sizeable amount of stimulus funds available to be spent towards year-end. We stick to our view that the OPR will be kept steady at 1.75% for the rest of the year.”