Bank Negara Malaysia (BNM), established on January 26, 1959, is the central bank of Malaysia and serves as the primary institution for managing the country's monetary and financial system. Headquartered in Kuala Lumpur, BNM plays a pivotal role in ensuring Malaysia's financial stability, economic growth, and sustainable development. Its primary functions revolve around monetary policy formulation, currency issuance, financial system regulation, and fostering an efficient payment system.
Core Mandate and Responsibilities
BNM's mission is to promote monetary and financial stability conducive to sustainable economic growth. It achieves this through a variety of functions:
- Monetary Policy: BNM formulates and implements monetary policy to manage inflation, promote economic stability, and foster sustainable growth. The Overnight Policy Rate (OPR) is one of its key tools to influence liquidity and interest rates in the economy.
- Currency Management: As the sole authority to issue Malaysia's currency, BNM ensures the availability of sufficient, high-quality currency to support economic activities while safeguarding public confidence.
- Financial System Oversight: BNM regulates and supervises financial institutions, including banks, insurers, and payment service providers. Its oversight ensures that these entities operate soundly, securely, and in compliance with regulatory standards.
- Payment System Development: The bank plays a critical role in developing and modernizing Malaysia's payment systems, facilitating secure, efficient, and inclusive financial transactions.
- International Reserves Management: BNM manages the country's international reserves to ensure financial resilience and mitigate external shocks.
Commitment to Innovation and Inclusion
In addition to its regulatory role, BNM is a driving force behind financial innovation and inclusion. It actively promotes the adoption of digital financial services and initiatives that enhance access to banking services for underserved communities. Programs such as microfinance and financial literacy campaigns aim to empower Malaysians with the tools and knowledge to manage their financial well-being.
Regional and Global Collaboration
BNM collaborates with regional and international counterparts to address global financial challenges. As a member of organizations like the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), BNM contributes to shaping global financial governance and fostering cooperation among central banks.BNM highlighted that the current OPR level aligns with its assessment of inflation and growth prospects. Recent indicators show sustained economic activity in the second quarter of 2024, driven by robust domestic expenditure and improved export performance.
Steady Economic Momentum
Exports are expected to benefit from the global tech upcycle, increased demand for non-electrical and electronics goods, and higher tourist spending. Additionally, strong employment and wage growth, alongside supportive policy measures, are bolstering household spending.
Investment activity remains resilient, supported by ongoing private and public sector projects, the realization of approved investments, and strategic initiatives under national master plans.
Inflation and Risk Outlook
Inflation has averaged 1.8% so far this year and is expected to remain manageable heading into 2025. However, BNM warned that inflation could be influenced by domestic policy measures yet to be fully implemented.
While the growth outlook is positive, it is subject to risks such as weaker-than-expected external demand and lower commodity production.
Ringgit’s Stability and External Influences
The ringgit’s performance remains largely driven by external factors, with near-term volatility anticipated due to global events, including the outcome of the US presidential election.
BNM noted that narrowing interest rate differentials between Malaysia and advanced economies are favorable for the ringgit. Malaysia’s strong economic prospects, structural reforms, and initiatives to encourage capital flows are expected to provide enduring support for the currency.
By maintaining the OPR at 3%, BNM reaffirms its commitment to fostering sustainable economic growth while navigating potential external and domestic challenges.
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