KUALA LUMPUR (Nov 3): Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 1.75% today as the country’s economic activity is projected to improve further and as the central bank expects the nation’s underlying inflation to remain subdued as the world economy contends with the resurgence in Covid-19 cases.

In a statement today, BNM said the global economy continues to recover, led by improvements in manufacturing and export activity although the resurgence in Covid-19 cases suggests that the global economic recovery will likely remain uneven in the near term. 

"For Malaysia, the latest indicators point towards significant improvement in economic activity in the third quarter. The introduction of targeted measures to contain Covid-19 in several states could affect the momentum of the recovery in the fourth quarter. Nonetheless, growth for the year 2020 is expected to be within the earlier forecasted range. 

"For 2021, economic activity is projected to improve further. This will be underpinned by the recovery in global demand, turnaround in public and private sector expenditure amid continued support from policy measures, and higher production from existing and new facilities. Nevertheless, the pace of recovery will be uneven across sectors, with economic activity in some industries remaining below pre-pandemic levels, and a slower improvement in the labour market. Downside risks to the outlook remain, stemming mainly from ongoing uncertainties surrounding the pandemic globally and domestically,” BNM said in the statement, which was issued following the conclusion of its Monetary Policy Committee's (MPC) final meeting for 2020 today.

On Malaysia’s inflation, BNM said that in line with earlier assessments, headline inflation is likely to average negative this year given the substantially lower global crude oil prices. For 2021, headline inflation is projected to average higher. 

The country’s inflation outlook will continue to be significantly affected by global oil and commodity prices, according to BNM.

"Underlying inflation is expected to remain subdued in 2021 amid continued spare capacity in the economy,” BNM said.

According to BNM, the MPC considers the current stance of the central bank’s monetary policy to be appropriate and accommodative. 

"The cumulative 125 basis points reduction in the OPR this year will continue to provide stimulus to the economy. The MPC will continue to assess evolving conditions and their implications on the overall outlook for inflation and domestic growth. 

"The bank (BNM) remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery,” BNM said.

The MPC had also during its meeting today approved the schedule of its meetings for 2021. 

BNM said that in accordance with the Central Bank of Malaysia Act 2009, the MPC will convene six times during 2021. 

"The meetings will be held over two days, with the monetary policy statement released at 3pm on the second day of the MPC meeting,” the central bank said.