OPR stays at 2.75pc as Bank Negara sees no need to tighten monetary policy, says governor

KUALA LUMPUR, Nov 6 — Bank Negara Malaysia (BNM) decided to keep the Overnight Policy Rate (OPR) at 2.75 percent as the central bank believed the rate was in line with its outlook for both price stability and sustainable economic growth, stated Governor Datuk Seri Abdul Rasheed Ghaffour. Speaking to Bernama following the OPR announcement, Abdul Rasheed highlighted that global growth displayed resilience, driven by factors like sustained technology investments and rising demand for artificial intelligence (AI) technologies.

He reported that Malaysia's economy maintained growth momentum, with the third-quarter (3Q) estimate showing a 5.3 percent expansion and an average growth rate of 5.6 percent for the first three quarters. The domestic demand continued to be supported by steady household spending, ongoing structural reforms, and investment activities, while exports benefited from robust demand for electrical and electronics (E&E) products, fueled by the global AI and technology upswing.

The governor declared that the central bank did not foresee an immediate need to tighten policy, as inflation remained under control. However, the Monetary Policy Committee (MPC) remained alert to potential signs of broader price pressures and retained the flexibility to adjust policy as necessary. BNM also kept a watchful eye on wage increases, as stronger household purchasing power might generate additional demand and exert upward pressure on prices.

Abdul Rasheed added that if wage hikes were to alter the inflation trajectory, a policy adjustment might be necessary to keep the monetary policy aligned with the growth and inflation outlook.

According to Abdul Rasheed, Malaysia's economic growth is projected to outpace five percent this year, with a positive outlook for 2027, bolstered by robust domestic demand, ongoing investment activities, and sustained external demand, particularly for technology-related products. He cautioned, however, that while the growth trajectory for 2027 remained strong, some moderation might be expected.

He pointed out that domestic demand was anticipated to remain buoyant, driven by improving household incomes, continued structural reforms, and measures under the 2027 budget. The global AI and technology upturn, along with demand for data centres, would continue to be significant growth drivers next year. Abdul Rasheed emphasized that Malaysia's diversified economy and substantial buffers would enable the nation to withstand global uncertainties.

Investments realized in previous years further supported growth, while new investments were expected to generate a higher multiplier effect on the economy. Nevertheless, inflation was projected to gradually rise next year, ranging between 1.8 to 2.8 percent compared to the current range of 1.5 to 2.5 percent, as global inflation persisted due to elevated input prices.