KUALA LUMPUR, Jan 22 (Bernama) — The following is an interview with Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour after January’s Monetary Policy Committee meeting:-
1. What was the Monetary Policy Committee’s (MPC) decision on the overnight policy rate today?
Answer: We have decided to maintain the overnight policy rate (OPR) at 3.0 per cent, consistent with our assessment of the current state of the Malaysian economy, which has seen sustained growth with low and stable inflation.
2. How did the MPC come to this decision?
Answer: The MPC aims to promote price stability that is conducive to the sustainable economic growth of the Malaysian economy. To do this, we look at the risks to both Malaysia’s inflation and growth outlook over the next one to two years when setting the OPR.
Let me start with growth: The Malaysian economy is expected to show continued strength in 2025, built from last year’s strong momentum, and this is supported by multiple growth drivers.
Domestically, household spending is expected to be resilient, premised on the prospects of greater job opportunities and higher incomes. Upward revisions of the minimum wage and civil servant salaries will also provide additional support to spending.
We will continue to see robust expansion on investments from three fronts. First, many multi-year projects from both the public and private sectors are still ongoing. Second, we are continuing to see the realisation of many of our approved investments.
According to the Malaysian Investment Development Authority (MIDA), 84.3 per cent of manufacturing investment projects approved since 2021 are at various stages of implementation.
Third, many initiatives across our various national master plans are still being implemented. These investments will help create jobs, increase exports, and grow our economy.
On the external front, we expect the global economy to continue growing and for global trade to remain broadly sustained.
This is important for a small and open economy like Malaysia. Having said that, we are aware that uncertainties surrounding trade and investment restrictions might affect this outlook.
We are well-plugged into many global supply chains so we need to monitor external factors that can impact us domestically. We expect the global tech upcycle to continue to support demand for our semiconductors.
We also expect our exports of non-electrical and electronics (E&E) products to continue expanding as well as higher tourist spending.
Now, let me turn to inflation – the pace of overall price increases in Malaysia. Inflation averaged at 1.8 per cent in 2024, which is lower than 2023. We expect it to remain manageable in 2025. More importantly, we are not seeing excessive domestic demand pressures and global cost pressures have also eased.
Additionally, the overall impact of recently announced domestic policy reforms on inflation is expected to be contained. Any upside risks, of course, will depend on the extent of the spillovers to the economy alongside how global commodity prices perform, and financial market developments.
With all this in mind, we have decided to maintain the OPR at 3.0 per cent, where it will continue to be supportive of the economy. Credit conditions remain supportive of household and business financing needs, with relatively stable lending rates and sustained credit growth. This will continue to provide a conducive environment for economic activity, reinforcing the economy’s prospects.
3. What is the one thing we can take away from this recent monetary policy decision or process?
Answer: I want to take this opportunity to share that the MPC always looks ahead when setting monetary policy. This is because the effects of OPR changes on economic activity and inflation do not happen right away. The MPC meets regularly, at least six times a year at pre-determined dates to assess current and forward-looking data at regular checkpoints, while keeping abreast of potential turning points in the economy.
The next decision will be announced on March 6. This will allow us to monitor conditions as they evolve and react accordingly.
Going forward, we will continue to be vigilant against factors that will affect our growth and inflation trajectory. This includes potential risks to the global economy and the growth of our major trading partners against a backdrop of heightened trade and investment restrictions, as well as global policy uncertainties.
Domestically, we will keep an eye on how our demand conditions evolves throughout the year and on any developments that may result in prolonged price pressures.
4. There has been a lot of interest on the ringgit. While we understand that this is not directly related to BNM’s monetary policy decision, what is the ringgit’s outlook in 2025?
Answer: Like most other regional currencies, the ringgit has been influenced primarily by external developments. Despite the challenging global environment in 2024, the ringgit appreciated by 2.7 per cent against the US dollar and 7.5 per cent against our major trading partners.
The narrowing interest rate differentials between Malaysia and advanced economies is positive for the ringgit in 2025. While financial markets could experience some volatility from the global uncertainties, our favourable economic prospects and domestic structural reforms, together with ongoing initiatives to encourage fund flows, will continue to provide enduring support to the ringgit.
— BERNAMA
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