In a surprising move, Bank Negara (BNM) announced it will maintain the overnight policy rate (OPR) at 2.75% following a meeting of its monetary policy committee (MPC) on January 19, 2023. This is the opposite of what most analysts predicted, which is an increase in OPR by 0.25% in January, followed by another 0.25% hike in March.

At the start of 2022, the OPR was at 1.75% and remained that way after the MPC convened on March 3. The first of hour OPR hikes – each by 0.25% – was on May 11, which was then followed by increases on July 6, September 8 and November 3.

Referring to BNM data, the OPR was at its highest at 3.5% from April 26, 2006 to October 24, 2008. Meanwhile, the OPR was at its lowest at 1.75% from July 7, 2020 to March 3, 2022 as the country battled the Covid-19 pandemic.

The OPR has an impact on car loans, which may see hire purchase loans become more expensive. The Malaysian Automotive Association (MAA) has said it expects car sales to drop this year after a record 2022, with the OPR dampening consumer confidence and their ability to secure car loans

According to BNM’s release, the latest data indicates Malaysia experienced continued economic expansion in the final quarter of last year on account of resilient domestic demand. As a result, growth for 2022 is expected to exceed the earlier projected range of 6.5-7.0%, although this is expected to moderate amid a slower global economy.

The central bank also noted that headline inflation has averaged 3.4% for the period January-November 2022. As projected, headline inflation peaked in 3Q 2022, while underlying inflation, as measured by core inflation, has averaged 2.9% up to November 2022.

This year, headline and core inflation are expected to moderate but remain at elevated levels due to lingering demand and cost pressures. Existing price controls and fuel subsidies, along with remaining spare capacity in the economy, will continue to partly contain the extent of upward pressures to inflation, it added.