Economy continued to grow despite tariff uncertainties- BNM governor
KUALA LUMPUR: Following is the transcript of Bernama's email interview with Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour on the Overnight Policy Rate (OPR) and Statutory Reserve Requirement (SRR).
Q1. Governor, can you walk us through the Monetary Policy Committee's (MPC) decision on the Overnight Policy Rate (OPR) today? The MPC has decided to maintain the OPR at 3 per cent at its meeting today.
At present, this decision remains consistent with our assessment of the Malaysian economy. The MPC remains vigilant to ongoing developments that may affect our growth and inflation prospects. We will continue to assess our monetary policy stance to ensure that it remains conducive to sustainable economic growth amid price stability.
Q2. How do you see these tariffs and shifting global trade dynamics impacting Malaysia's economic outlook moving forward?
As a small and open economy, we acknowledge that Malaysia will face both direct and indirect impacts from these tariffs. Beyond the direct impact of tariff imposition, events that affect the global economy may also spill over to affect our growth and inflation trajectory. Given current developments, we will be reviewing the GDP growth forecast of 4.5–5.5 per cent for 2025, which was announced in March. But we do not expect a recession. While outcomes from trade negotiations remain uncertain, we are facing this from a position of strength.
Latest data indicates that Malaysia's economy continued to grow in the first quarter of 2025. This suggests our domestic demand remains resilient, anchored by household spending and investment activity.
Moving forward, employment and wage growth, and income-related policy measures will support household spending. Investment activity will be sustained by the continued realisation of approved projects. Together, this will provide us with a buffer against global shocks.
An escalation of trade tensions and heightened global policy uncertainties will weigh on Malaysia's external sector. But continued demand for our electrical and electronic (E&E) products, which are excluded from the tariffs, and higher tourist spending will cushion our exports. We expect travellers to continue visiting Malaysia, encouraged by improved flight connectivity, visa-free policies, and Visit Malaysia Year 2026 promotions. Our diversified exports structure also reduces our reliance on any single product or market. At present, no single market accounts for more than 15 per cent of Malaysia's exports.
Downside risks could stem from a deeper economic slowdown across our major trading partners. Weaker sentiment can affect domestic spending and investments. Lower-than-expected commodity production will also weigh on growth.
On the other hand, favourable trade negotiation outcomes, pro-growth policies in major economies, as well as more robust tourism activity could raise Malaysia's growth prospects.
Inflation stayed moderate in the first quarter of this year. We do not expect tariffs to significantly impact our domestic inflation outlook amid moderate global cost conditions and the absence of excessive domestic demand pressures.
Let me explain why.
Ongoing trade tensions are expected to weigh on the global demand outlook, which will in turn, support a further easing of global commodity prices. This can help drive down production costs for businesses in Malaysia. The contained cost environment, including lower commodity prices, ensures that conditions will remain favourable for previously-announced domestic policy reforms later this year, including the planned subsidy rationalisation of RON95.
Q3. How is BNM planning to navigate these tariff developments and ongoing trade uncertainty? Can we expect a rate cut soon?
Malaysia's economy is in a relatively stable place for now. But as I have mentioned earlier, we are facing downside risks to our growth. We continue to monitor the situation closely and stand ready to act if need be.
Malaysia's small and open nature means that our economy, exchange rate, and financial markets are affected by external shocks. Global developments are beyond our control, but we can shape our response to them. In doing so, we have a range of policy tools that allow us greater flexibility and the ability to tailor our response to specific issues. These are particularly useful if the external shocks do not lead to broad-based domestic impact and hence, would benefit from more targeted support.
For example, BNM's market operations will continue to ensure orderly functioning of the foreign exchange market and uninterrupted financial intermediation during times of volatility. Separately, we also today announced plans to ease the Statutory Reserve Requirement (SRR) to release additional liquidity into the financial system.
Aside from this, we maintain close coordination with the government on fiscal measures to ensure we are working towards the same objectives. We understand that this period of uncertainty can be concerning for everyone. As the situation unfolds, we aim to continue sharing our assessments of the Malaysian economy and the rationale behind our policy decisions so that the public and businesses can have the information needed to plan accordingly.
Q4. We noticed that BNM also eased the SRR. Could you share a bit more about what the SRR is and what is the rationale behind the SRR cut?
Let me first emphasise that the SRR is not a signal of our monetary policy stance. The OPR remains BNM's sole indicator used to signal our monetary policy stance.
The SRR is a liquidity management tool that BNM uses to withdraw or release liquidity into the banking system on a longer-term basis. SRR refers to the portion of funds that banks are required to hold as reserves with BNM. Once these funds are part of the banks' reserves, they are not able to use it for other purposes.
Our decision today to ease the SRR is part of BNM's continuous efforts to ensure sufficient liquidity in the domestic financial system. This will facilitate banks to better manage their liquidity in an environment of greater financial market volatility and provide continued support for financial intermediation activities.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
26 minutes ago
- The Star
Indonesia confirms US aircraft carrier USS Nimitz's passage through Straits of Melaka
JAKARTA (Bernama) -- Indonesia's military said Saturday that the United States (US) aircraft carrier USS Nimitz was transiting the Strait of Malacca in line with international maritime law when it was last detected last week. The vessel was travelling from the South China Sea to the Indian Ocean via the Singapore Strait and the Strait of Malacca, the Indonesian Armed Forces Information Centre (Puspen TNI) said. "The ship was exercising its right of transit passage under the 1982 UN Convention on the Law of the Sea (UNCLOS),' the centre's head, Major General Kristomei Sianturi, stated in a statement. He noted that the convention allows foreign warships to pass through international straits without prior notification, provided they do not pose a threat to the security of coastal states. The statement came in response to public concern after a video showing the vessel near Aceh province on June 17 circulated widely on local social media, amid rising tensions in the Middle East involving Israel and Iran. According to the Indonesian navy, the USS Nimitz was last detected with its automatic identification system (AIS) active in waters north of Belawan, near Medan in North Sumatra, on Tuesday. Kristomei said the Indonesian Armed Forces continued to monitor all foreign maritime activity in the country's waters and remained vigilant in safeguarding national sovereignty. - Bernama
The Sun
30 minutes ago
- The Sun
Malaysian Bar renews call for refugee rights
PETALING JAYA: On this year's World Refugee Day, the Malaysian Bar has reaffirmed its commitment to standing in solidarity with refugees in Malaysia and around the world. Observed annually on June 20, World Refugee Day 2025 carries the theme Solidarity with Refugees, underscoring the urgent need for compassion, protection and meaningful legal reform for displaced communities. 'Globally, over 100 million people have been forcibly displaced due to war, persecution, violence and human rights violations,' said Malaysian Bar president Mohamad Ezri Abdul Wahab. He said Malaysia hosts a significant refugee and asylum-seeker population, many of whom live without legal recognition or access to basic rights such as education, healthcare and employment. 'Despite facing immense challenges, refugee communities in Malaysia continue to demonstrate resilience and strength. 'Many contribute to local society through informal education programmes, community initiatives, skills development and humanitarian outreach – efforts that reflect the spirit of this year's theme,' he said in a statement. However, legal and systemic barriers remain. Refugees in Malaysia are not formally recognised under domestic law, leaving them vulnerable to exploitation, arbitrary arrest and detention. In light of these challenges, Mohamad Ezri called for urgent and meaningful reforms to uphold the rights and dignity of refugees and asylum-seekers. 'Firstly, the Malaysian Bar urges the enactment of a clear legal and policy framework that recognises the rights of refugees and asylum-seekers in accordance with international standards. 'Secondly, we call on the Malaysian government to accede to the 1951 Refugee Convention and its 1967 Protocol.' He also stressed the importance of ensuring access to essential services, including legal protection, healthcare, education and lawful employment for all refugees and asylum-seekers. In addition, the Malaysian Bar advocates community engagement and partnerships that support integration and uphold the dignity of displaced persons. 'As officers of the court and advocates for justice, the Malaysian Bar remains steadfast in its commitment to defending the rights of marginalised and vulnerable communities. 'True solidarity with refugees goes beyond compassion. It demands the pursuit of meaningful, rights-based solutions that ensure protection, dignity and inclusion. 'On this World Refugee Day, let us reaffirm our shared humanity and strive to build a society in which no one is left behind, regardless of their status or origin,' he said.
The Star
40 minutes ago
- The Star
Bursa Malaysia to remain cautious, CI to trade within the 1,500-1,500 range beginning from Monday (June 23)
KUALA LUMPUR (Bernama): Bursa Malaysia is expected to remain cautious from this Monday (June 23), tracking Wall Street's performance as markets digest signals from the United States (US) Federal Open Market Committee (FOMC), said an analyst. UOB Kay Hian Wealth Advisors Sdn Bhd's head of investment research Mohd Sedek Jantan noted that the US Federal Reserve's (Fed) projections, characterised by slower growth, elevated inflation, and a higher unemployment trajectory for 2025-2027-suggest a stagflationary undertone, which could weigh on risk sentiment. "Growth-sensitive sectors may face headwinds as the policy outlook remains uncertain. The split in the FOMC's dot plot, with members divided between no interest rates cuts and two cuts by year-end, implies limited near-term easing and reduces the likelihood of a July cut,' he told Bernama. Mohd Sedek also pointed out that the benchmark index is hovering near the psychological threshold of 1,500 points, adding that a breach of this level could trigger opportunistic buying by institutional investors, especially as the index nears its immediate support at 1,490 points. "While the FOMC's guidance has introduced caution, markets may find support at lower levels, where valuations become more compelling. Geopolitical-driven volatility is often short-lived, and we expect a moderation in risk sentiment as these concerns subside,' he said. Meanwhile, Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng market focus next week will shift to several key economic indicators, including the US quarterly gross domestic product and jobless claims. "The FBM KLCI is currently priced at about 12 times the calendar year 2025 price-to-earnings ratio, notably below its long-term average of over 16 times, indicating potential for further appreciation. "The subdued valuation may attract bargain hunters. For the week ahead, we expect the index to trade within the 1,500-1,530 points range,' Thong added. For the week just ended, Bursa Malaysia was mostly subdued as investors stayed on the sidelines due to ongoing concerns over the Middle East conflict and the anticipated implementation of reciprocal tariffs by US President Donald Trump. On a Friday-to-Friday basis, the barometer index dropped 15.37 points to 1,502.74 from 1,518.11 a week earlier. The FBM Emas Index fell 141.109 points to 11,228.99, the FBMT 100 Index was down 128.59 points to 11,015.45, and the FBM Emas Shariah Index declined 128.19 points to 11,201.34. The FBM 70 Index decreased 250.96 points to 16,117.75 and the FBM ACE Index shrank 86.34 points to 4,400.85. Across sectors, the Industrial Products and Services Index eased by 4.08 points to 147.27 and the Energy Index was 5.05 points lower at 735.71. The Plantation Index slid 0.40 of-a-point to 7,220.52, the Healthcare Index dipped 85.83 points to 1,691.89, and the Financial Services Index tumbled 179.87 points to 17,468.38. Turnover dropped to 13.72 billion units worth RM10.84 billion from 13.89 billion units valued at RM10.61 billion in the preceding week. The Main Market volume fell to 6.29 billion units valued at RM9.63 billion against 6.42 billion units worth RM9.47 billion previously. Warrants turnover expanded to 6.16 billion units worth RM845.61 million versus 5.97 billion units valued at RM687.92 million a week ago. The ACE Market volume slipped to 1.25 billion units valued at RM361.21 million compared with 1.50 billion units worth RM458.75 million in the preceding week. - Bernama
