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Thursday, May 19, 2022
HomeNewsBNM increases OPR rate to 2.0% to combat inflation risk

BNM increases OPR rate to 2.0% to combat inflation risk

Yesterday (11 May), Bank Negara Malaysia (BNM) has announced that the overnight policy rate (OPR) by 25 basis points to 2.00% following its third Monetary Policy Committee (MPC) meeting this year. 

In its Monetary Policy Statement, BNM said the ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.25 % and 1.75% respectively.

BNM said the increase in OPR comes after the improvement in the labour market and the reopening of the global economy that supported the recovery of economic activity. 

Source: Malay Mail

“These have partly cushioned the impact of the military conflict in Ukraine and the strict containment measures in China.”

“Inflationary pressures have increased sharply due to a rise in commodity prices, strained supply chains and strong demand conditions, particularly in the United States (US),” it said.

BNM said it also expects other central banks to adjust their monetary policy settings at a faster pace to reduce inflationary pressures.

Source: FMT

It also explained that the global growth outlook will continue to be affected by the developments surrounding the conflict in Ukraine, Covid-19, global supply chain conditions, commodity price shocks, and financial market volatility.

As for the Malaysian economy, BNM observed that the latest indicators showed that growth is on a firmer footing, driven by strengthening domestic demand amid sustained export growth.

The labour market has further lifted, recording a lower unemployment rate, higher labour participation and better income prospects, it said.

“The transition to endemicity on 1 April 2022 would strengthen economic activity, in line with further easing of restrictions and the reopening of international borders.”

“Investment activity and prospects have also improved, underpinned by the realisation of multi-year projects and positive growth outlook.” said BNM.

However, BNM highlighted that the risk to growth remains, which included a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, and adverse developments surrounding Covid-19.

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