KUALA LUMPUR (Jan 20): Bank Negara Malaysia (BNM) maintained its overnight policy rate (OPR) at 1.75% in its first monetary policy committee (MPC) meeting for the year. The rate has been kept at 1.75% — the lowest on record — since July 7, 2020, when the central bank cut the rate from 2%.

BNM in a statement on Thursday (Jan 20) said the MPC considers the current stance of monetary policy to be appropriate and accommodative.

"Fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity.

"The stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for inflation and domestic growth," it elaborated.

The OPR climbed to its highest on record at 3.5% in April, 2006, when the central bank raised the rate from 3.25%. It was subsequently maintained at 3.5% until Oct 24, 2008, according to BNM data.

BNM added that headline inflation averaged 2.3% for the period of January-November last year and expected average headline inflation in 2022 to remain moderate as the base effect from fuel inflation dissipates.

Meanwhile, underlying inflation as measured by core inflation is expected to edge upwards as economic activity normalises amid the environment of high input costs, it said.

"Nevertheless, core inflation is expected to be modest, with upside risk contained by the continued slack in the economy and labour market.

"The outlook, however, continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions," BNM said.

According to the central bank, this year, growth is expected to gain further momentum, driven by expansion of global demand and higher private sector expenditure amid improvements in the labour market and continued policy support.

"Risks to the growth outlook, however, remain tilted to the downside.

"Such risks may arise from a weaker-than-expected global growth, a worsening in supply chain disruptions, and the emergence of severe and vaccine-resistant Covid-19 variants of concern," it said.

The next MPC meeting is scheduled for March 3, 2022.