Bank Negara Malaysia (BNM) has announced today (9th May 2024) that the Overnight Policy Rate (OPR) will remain steady at 3%.

Bank Negara Malaysia (BNM) has announced today (9^th May 2024) that the Overnight Policy Rate (OPR) will remain steady at 3%. This rate has remained unchanged since May 2023, marking a year of consistent monetary policy.

The monetary policy meets six times annually to deliberate on the OPR.

Source: BNM

Looking ahead, there is uncertainty surrounding whether the OPR will stay at 3% or increase further. Historically, the highest OPR since April 2015 was 3.50%, and the lowest was 1.75% in July 2020 during the COVID-19 pandemic. Typically, changes in the OPR are made in increments of 25 basis points (0.25%).

As for the likelihood of an OPR increase this year, it appears unlikely that there will be a reduction in the near future. Instead, the OPR will either hold steady or increase depending on several factors:

1. EPF Withdrawals: Starting May 11, 2024, contributors to the Employees Provident Fund (EPF) can withdraw from Account 3 at any time, potentially leading to RM25 billion (around 1.3% of GDP) in withdrawals. This could result in increased demand-driven inflation.



2. Civil Service Salary Hike: There may be a raise in civil service salaries by over 13% beginning in December, which could also contribute to inflationary pressures.



3. Fuel Subsidy Rationalization: Implementation of fuel subsidy rationalization could occur in 2025 or earlier, which may further increase inflation risk.

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This article was first published as "BNM Maintain OPR at 3% - Updated 9th May" on miichealyeoh.com.

The author of this article, Miichael Yeoh, has over 20 years of experience in property, mortgage and the investment industry.