Kuala Lumpur – Bank Negara Malaysia (BNM) raised the Overnight Policy Rate (OPR) by 25 basis points to 3.25% at its Monetary Policy Committee (MPC) meeting today. This is the first increase since July 2014. The last change on OPR by BNM was a reduction from 3.25% to 3% in July 2016.
BNM said in a statement that with the OPR hike, the floor and ceiling rates of the corridor for the OPR are correspondingly raised to 3% and 3.50% respectively.
According to the Prime Minister Datuk Seri Najib Razak, this decision is based on the strength of the national economy. Thisd decision will prevent Malaysia from continuing a low interest regime which could bring risks to the economy in the long run.
In its Monetary Policy Statement released today, BNM stated a few factors that underline the decision:
Headline inflation averaged at 3.7% in 2017. Inflation is expected to average lower in 2018, on expectations of a smaller effect from global cost factors. A stronger ringgit exchange rate compared to 2017 will mitigate import costs.
Economist have been expecting such an increase in view of the prevailing market situations. But some have earlier expressed doubt whether BNM will make such a move in view of the expected general election coming soon.