News: Bank Negara Keeps OPR At 3%

Jul 10, 2019

Bank Negara Malaysia’s monetary policy committee (MPC) decided to keep the overnight policy rate (OPR) at three percent as the global economy continues a moderate expansion. The central bank noted that labour conditions remain firm in advanced economies, while domestic demand support growth in Asia.

“Leading indicators, however, point to a softening of the near term global economic outlook, with considerable downside risks remaining primarily from prolonged trade tensions. While the prospects of monetary easing in the major economies have somewhat eased global financial conditions, heightened policy uncertainty could lead to excessive financial market volatility.”

Read More: What is OPR and how it can affect you? 

Bank Negara revealed that the growth of the Malaysian economy during the first quarter of 2019 was within expectations.

“Looking ahead, while the external sector performance is likely to be weighed down by slower global growth and trade tensions, economic growth will be supported by domestic demand,” it said.

“Household and capital spending will continue to be driven by stable labour market conditions and capacity expansion in key sectors such as manufacturing and services.”

According to Bank Negara, the baseline projection remained within the 4.3 to 4.8 percent range. However, this projection is subject to downside risks from ongoing uncertainties in the domestic and global environment, extended weakness in commodity-related sectors and worsening trade tensions.

And while headline inflation continued to be low in the recent period, it is forecasted to increase in the coming months as the changes in consumption tax policy’s impact lapses.

With this, the central bank expects average headline inflation to be broadly stable this year compared to 2018.

“The trajectory of headline inflation will be dependent on global oil prices and policy measures such as the timing of the lifting of the price ceiling on domestic retail fuel prices. Underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and in the absence of strong demand pressures,” it said.

 

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Samson Kuek
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