KUALA LUMPUR (March 31): Malaysia's monetary policy in 2021 will remain accommodative as it aims to focus on supporting a sustainable economic recovery amid modest price pressures, according to Bank Negara Malaysia (BNM). 

In its Economic and Monetary Review 2020 report released today, BNM said the domestic monetary and financial conditions for this year are expected to remain conducive given the accommodative monetary policy, particularly the significant reductions in the Overnight Policy Rate (OPR) throughout 2020, and other ongoing policy support. 

The central bank said the Monetary Policy Committee (MPC), which meets six times a year to decide on the OPR, will be mindful to avoid a premature withdrawal of policy support.

"Given the uneven pace of recovery and the downside risks to the outlook, a sufficiently accommodative monetary policy stance will be maintained to support an entrenched economic recovery while ensuring that price pressures remain manageable. 

"The MPC will continue to closely monitor the emergence of signs of a more entrenched and sustainable economic recovery in the period ahead, while remaining vigilant against a build-up of financial imbalances," it said. 

Given the gravity and scope of the Covid-19 economic shock, BNM also called for the complementary use of monetary, fiscal and financial sector policies, which includes the use of more targeted and sector-specific measures for the affected segments of the economy to support and secure a sustainable economic recovery. 

For its part, BNM said it will continue to utilise all its policy levers to ensure conducive financial conditions to support economic recovery, which includes liquidity operations, appropriate regulatory and supervisory measures, the establishment of financing facilities and other complementary financial sector policies that serve to ensure orderly market conditions, preserve the smooth functioning of the financial intermediation process and encourage financing to the real economy.

Most importantly, BNM highlighted that initiatives to strengthen social protection in Malaysia, such as the widening of social insurance coverage, are vital as a safeguard against socioeconomic vulnerabilities going forward. 

"The collective impact of these policies would provide the needed countercyclical and longer-term support to enhance Malaysia’s economic dynamism towards a sustainable economic recovery. 

"To this end, efforts will continue to focus towards ensuring an optimal policy configuration for the economy to stand on a solid base for recovery," it added. 

Read more stories from the BNM Annual Report 2020 here.