BNM said domestic financial conditions remain conducive to financial intermediation amid sustained credit growth. “These factors will continue to underpin the growth momentum going into 2024,” it said.
“We are keeping an eye on how well the Malaysian economy is doing, to ensure that the overnight policy rate (OPR) continues to support growth while keeping inflation in check,” it said, adding that inflation has trended down as cost conditions ease.
It said the current OPR level is consistent with the health of the economy and remains supportive of growth. It added that financing remains available amid sustained credit growth.
At the conclusion of its two-day meeting today, the central bank’s Monetary Policy Committee (MPC) decided to maintain the OPR at 3%.
BNM also stated that economic growth was affected by slower external demand and a decline in commodity production in the second quarter of the year.
Nevertheless, it said that moving forward, growth will continue to be driven by resilient domestic expenditure amid the challenging external environment.
“Continued employment and wage growth, particularly in the domestic-oriented sectors, 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 infrastructure projects, and implementation of catalytic initiatives under the recently announced national master plans,” it said.
In line with expectations, headline and core inflation have continued to ease amid the more moderate cost conditions. This moderating trend would likely continue in the second half of 2023, BNM said.
It noted the risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, global commodity prices and financial market developments, as well as the degree of persistence in core inflation.
On the external front, it said the global economy continues to expand, driven by resilient domestic demand supported by strong labour market conditions. Global growth, however, remains weighed down by persistently elevated core inflation and higher interest rates.
Global trade is also affected by rotation of spending from goods to services, and the ongoing electrical and electronics (E&E) downcycle,” it said, adding that slower-than-expected growth in China also weighed on the global economy.
“The growth outlook remains subject to downside risks, mainly from a slower momentum in major economies, higher-than-anticipated inflation outturns, an escalation of geopolitical tensions, and a sharp tightening in financial market conditions,” BNM added.