BNM maintains OPR at 3% in May 2024 meeting, hire purchase interest rate will remain the same
Following today’s monetary policy committee (MPC) meeting, Bank Negara Malaysia (BNM) decided to maintain the overnight policy rate (OPR) at 3%. The 3% OPR remains the same from May 2023 when it was increased by 25 basis points from 2.75%.
Auto loans are affected by OPR, because if banks have higher borrowing costs, it will pass them on to consumers at higher interest rates, leading to car lease purchases becoming more expensive and harder to get approved. So any spike in OPR has an impact on auto sales. Therefore, if interest rates are not increased, this will be good news for MAA.
According to BNM, the OPR level is consistent with the health of the economy and still supports growth while keeping inflation under control. The BNM MPC meets to make OPR decisions every two months.
The next meeting will take place in July 2024.
Here is BNM’s full statement:
Monetary policy statement May 2024
At today’s meeting, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00%.
The global economy continues to expand amid resilient labor markets in some countries and a continued recovery in global trade. Looking ahead, global growth is expected to be sustained as headwinds from tightening monetary policy and reduced fiscal support will be supported by positive labor market conditions and inflation. spread at a moderate level. Global trade is expected to strengthen further as the global technology development cycle gains momentum. While global inflation and core inflation have continued to decline in recent months, the pace of deflation has slowed in some advanced economies. This raises the prospect that interest rates will remain high for longer, especially in the US. The growth outlook remains subject to downside risks, mainly due to further escalation of geopolitical tensions, higher-than-expected inflation and volatility in global financial markets.
For the Malaysian economy, the latest indicators point to higher economic activity in the first quarter of 2024, thanks to stable domestic spending and a positive turn in exports. Going forward, a recovery in exports is expected to be supported by the global technology development cycle and continued strength in non-electrical and electronic goods. The number of tourists arriving and spending also tends to increase further. Employment and wage growth continue to support household spending. Investment activity will be supported by the continued progress of multi-year projects in both the private and public sectors, the implementation of catalytic initiatives under the national master plan as well as Greater efficiency of approved investments. Growth prospects face downside risks due to weaker-than-expected external demand and a broader decline in commodity production. Meanwhile, upside risks mainly stem from larger spillovers from the technology development cycle, stronger tourism activity and faster implementation of existing and new projects.
Headline and core inflation were at 1.7% and 1.8%, respectively, in the first quarter of 2024. Going forward, inflation in 2024 is expected to remain moderate, looking at overall reflects stable demand conditions and restrained cost pressures. The outlook for the rest of the year depends on the implementation of domestic policies on subsidies and price controls, as well as global commodity prices and financial market developments. After incorporating the potential impact of subsidy rationalization, headline and core inflation are forecast to average between 2.0% – 3.5% and 2.0% – respectively. 3.0% for the year.
The Ringgit does not currently reflect Malaysia’s fundamentals and economic growth prospects. External factors, specifically changing expectations about the monetary policy path of major economies and ongoing geopolitical tensions, have led to increased volatility in both capital flows and exchange rates across the region, including the Ringgit. Coordination initiatives by the Government and Bank Negara Malaysia (BNM) with Government-Linked Companies (GLCs) and Government-Linked Investment Companies (GLICs), as well as engagement of the business gained greater traction, easing pressure on the ringgit. BNM will continue to manage risks arising from heightened financial market volatility. In the medium term, domestic structural reforms will provide more lasting support for the Ringgit.
At the current OPR level, the monetary policy stance remains supportive of the economy and is in line with the current assessment of inflation and growth outlook. MPC remains alert to ongoing developments to make an assessment of the domestic inflation and growth outlook. The MPC will ensure that the monetary policy stance remains conducive to sustained economic growth amid stable prices.
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