KUALA LUMPUR: Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) has decided to keep the overnight policy rate (OPR) unchanged at 3.00 per cent as it expects growth will continue to be supported by domestic demand amid strong labour market conditions.
The MPC had only one rate hike of 25 basis points last year in May.
In a statement after its MPC meeting today, BNM said at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.
The central bank said the MPC remains vigilant to ongoing developments to inform the assessment on the outlook of domestic inflation and growth.
"The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," it said.
According to BNM, there are signs of a recovery in the electrical and electronics (E&E) sector, but global trade remains soft partly due to the continued shift in spending from goods to services, and ongoing trade restrictions.
While China's economy continues to show signs of improvement, the central bank said its recovery remains modest given the weakness in the property market.
"Global headline and core inflation edged downwards in recent months but continue to be above average. "On the global front, while the monetary policy stance is likely to remain tight in the near term, the tightening cycle has peaked for most central banks. "The growth outlook remains subject to downside risks, mainly from an escalation of geopolitical tensions, higher-than anticipated inflation outturns, and heightened volatility in global financial markets," it said.
For the Malaysian economy, the fourth quarter advance estimates for GDP affirmed that the overall growth for 2023 expanded within expectations.
Moving forward, BNM said growth is expected to improve in 2024, supported by the recovery in exports and resilient domestic expenditure.
"Continued employment and wage growth remain supportive of household spending. Tourist arrivals and spending are expected to improve further. "Investment activity would be supported by continued progress of multi-year projects in both the private and public sectors, and implementation of catalytic initiatives under the national master plans," it said. As expected, both headline and core inflation continued to moderate in the fourth quarter, mainly due to lower cost pressures amid stabilising demand conditions.
Overall, BNM said both headline and core inflation for 2023 are within expectations, averaging for the year at 2.5 per cent and 3.0 per cent, respectively.