BNM's Decision To Keep OPR At 3 Pct Will Stimulate Economic Growth - Economists

By Rosemarie Khoo Mohd Sani

KUALA LUMPUR, Jan 22 (Bernama) -- Bank Negara Malaysia's (BNM) strategy to maintain the Overnight Policy Rate (OPR) at 3.0 per cent today is meticulously crafted, emphasising sustained economic growth while keenly monitoring the ebb and flow of global financial and geopolitical developments, said economists. 

SPI Asset Management managing director Stephen Innes said this careful watch is pivotal, though not the sole factor, as the central bank also prioritises currency stability.

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“By keeping the OPR steady, BNM aims to protect the ringgit against excessive volatility, a necessity amid an invigorated United States (US) economy and the Federal Reserve's increasingly hawkish stance.

“This cautious monetary policy is likely to continue well into 2025 as the central bank waits for clearer global economic signals before making any rate adjustments,” he told Bernama.

Innes further said this strategic patience ensures that Malaysia’s monetary approach not only stimulates economic growth but also maintains price stability, aligning with broader economic plans and adapting to market expectations.

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Meanwhile, UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan said the unchanged OPR aligned with its projections, where it represents a strategic measure to bolster Malaysia’s anticipated economic growth of 5.1 per cent for 2024.

“By keeping the OPR at its current level, he said BNM is fostering economic expansion while ensuring borrowing costs remain manageable for both businesses and consumers.

“This stability enhances confidence among businesses and individuals to invest and spend, which are key drivers of economic growth,” said Mohd Sedek. 

He said BNM also mitigates inflationary pressures while avoiding an overly restrictive monetary policy stance that could stifle economic activity.

The latest inflation data from November 2024 indicates a rate of 1.8 per cent, suggesting inflation remains well under control.

Notably, the last adjustment to the OPR occurred in April 2023, when it was increased by 0.25 per cent from 2.75 per cent to 3.00 per cent.

The current decision provides the economy with the opportunity to fully absorb the effects of that adjustment, delivering a balanced approach without introducing undue strain.

“While concerns have been raised about the potential inflationary impact of recent civil servant salary increases, the effect is expected to be minimal.

“Productivity gains are helping to offset the wage adjustments, and authorities are closely monitoring the prices of essential goods to ensure stability,” he said. 

On the global front, developments in trade relations, particularly between the US and China, remain a critical focus. In the past few weeks, concerns emerged regarding a potential 60 per cent tariff by the US on Chinese imports.

However, these fears have been alleviated following US President Donald Trump’s indication that a lower tariff of 10 per cent is being considered. While this has brought temporary relief to the markets, further announcements on trade policies are anticipated.

In light of such global uncertainties, Mohd Sedek said BNM’s decision to maintain the OPR is a prudent one, offering much-needed stability while safeguarding the value of the ringgit.  

“Looking ahead, we forecast that BNM will keep the OPR at 3.00 per cent for the remainder of the year.

“However, as global conditions evolve, BNM would continue to monitor the situation and adjust its stance as necessary.

“The priority remains to strike a delicate balance... avoiding overreaction while ensuring the economy is adequately prepared for external challenges,” said Mohd Sedek.

For the time being, maintaining the OPR is the right decision to underpin economic stability and support Malaysia’s growth trajectory, he added. 

-- BERNAMA