06 November 2024
November Monetary Policy Committee (MPC) Meeting
- Bank Negara Malaysia decides to maintain the Overnight Policy Rate (OPR) at 3%.This marked the ninth consecutive meeting with unchanged interest rates, aligning with our expectations, as economic growth remains robust and inflationary pressures are well contained.
- BNM’s latest Monetary Policy Statement (MPS) retains its prior evaluations of growth and inflation,incorporating the anticipated effects of Budget 2025 measures. Malaysia’s GDP is on course to meet the official growth projection of 4.8% to 5.3% this year, bolstered by robust domestic demand and heightened export activities. Preliminary data from DOSM suggests a GDP expansion of 5.3% in 3Q2024, potentially raising the average growth for the first three quarters to 5.1%. Looking forward, we foresee sustained domestic demand, invigorated by initiatives such as the minimum wage hike and ongoing investment projects, continuing into 2025.
- Inflation is expected to rise in 2H2025 following a subdued level this year. Despite the removal of subsidy for diesel and electricity tariff hikes this year, inflation has been relative subdued, with the September inflation rate at 1.8%. We expect the full-year average inflation rate to remain below 2% in 2024. The government has announced the removal of RON95 subsidy for the T15 in 2025. As such, inflation is expected to rise, with the official inflation forecast at 2.0% – 3.5%, the wide range takes into account the secondary effects from the removal of subsidy. We expect OPR to stay at 3.0% until at least 1H2025.
- The MPC anticipates continued global economic expansion, buoyed by resilient labor markets and a recovering global trade environment. Positive labor market conditions, moderating inflation, and less restrictive monetary policies are expected to sustain global growth, with both (E&E) and non-E&E products supporting the ongoing recovery in global trade. Domestically, resilient expenditure and improved export activity contribute to robust economic performance. Exports are expected to benefit from the global tech upcycle, strong non-E&E product demand, and increased tourist spending. The progress of multi-year projects and implementation of national master plan initiatives drive vigorous investment activity, enhancing exports and the economy’s productive capacity.
- Narrowing interest rate differentials, and fiscal reforms to support MYR and the Malaysian bond market. The MPC observed that while the global economic outlook remains stable, the ringgit’s fluctuations are largely driven by external influences. The US election results could increase MYR volatility in the short term. However, narrowing interest rate differentials between Malaysia and advanced economies, positive growth prospects, domestic structural reforms, and ongoing efforts to stimulate capital flows are expected to support the ringgit.
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