By Sofia Nasir
PETALING JAYA, July 11 — Bank Negara Malaysia’s (BNM) decision to lower the overnight policy rate (OPR) is expected to support an economic growth of between 4.5 and 5 per cent this year.
Economist Prof Emeritus Barjoyai Bardai from Malaysia University of Science and Technology said the 25-basis-point OPR cut to 2.75 per cent is set to boost household spending, the largest contributor to the country’s economy.
He said BNM noted a decline in market liquidity due to the ongoing Gulf conflict and US tariffs; factors that have weighed on consumer spending.
“When BNM observes low market liquidity and reduced economic activity, it will lower the OPR to encourage borrowing, boost consumer spending, stimulate market demand and supply, and ultimately drive economic growth.
“Today, we are facing a crisis. In economics, the most critical crisis is a crisis of confidence. When households lose confidence in the economy, they stop spending,” he told Media Selangor at his office here today.
Barjoyai said in Malaysia, household spending is the largest component influencing the country’s economic growth rate.
He added that fluctuations in the OPR are unpredictable and depend entirely on global economic conditions.
He also explained that OPR adjustments are intended to manage inflationary pressures and support a more stable trajectory for the country’s economic growth.
On Wednesday, BNM’s Monetary Policy Committee lowered the OPR from 3 to 2.75 per cent.
BNM said the ceiling and floor rates of OPR corridor are correspondingly reduced to 3 per cent and 2.5 per cent, respectively.
It is the first time the OPR has been lowered since May 2023 after 12 consecutive holds at 3 per cent.
