KUALA LUMPUR: Economists have welcomed the central bank’s move to maintain the overnight policy rate (OPR) at 1.75%, considering the challenges and uncertainties surrounding the Covid-19 pandemic.

       Centre for Market Education chief executive officer Carmelo Ferlito said the decision to maintain the OPR was expected.

       “I welcome it because at least there has not been a further lowering of the reference rate, which may have further escalated the tensions on the inflation side. In this sense, Bank Negara should play a more prudent game in the months to come. The more the burden of Covid restrictions ease, the more the actual size of hidden inflation can emerge and the very expansive policy implemented so far could backfire,” he told StarBiz.

       Separately, OCBC Bank economist Wellian Wiranto said, in a noted yesterday, the OPR level has been a “tough floor to crack” and that would likely remain in the foreseeable future, unless events take a dramatic turn “southward.”

       “Still, the bar for it to cut rates appears to be a lot loftier than we had anticipated. If months of lockdown resulting in the spectre of a technical recession do not move the needle now, it would probably take a manifestation of risks of much greater magnitude for Bank Negara to be easing.”In a statement yesterday, Bank Negara said the reimposition of nationwide containment measures to curb the resurgence in Covid-19 cases had dampened the growth momentum of the economy.

       “However, the gradual relaxation for more economic sectors to operate, along with higher adaptability of firms to the new operating environment and continued policy support, would partly mitigate the impact and allow the economy to resume its recovery path. “Moving forward, the further easing of containment measures, rapid progress of the domestic vaccination programme and continued expansion in global demand will support the growth momentum going into 2022.”

       The central bank added that risks to the growth outlook remain tilted to the downside, due to external and domestic factors.

       “These include delays in the easing or reimposition of broad-based containment measures due to the impact of new Covid-19 variants of concern and a weaker-than-expected global growth recovery.”

       Bank Negara said headline inflation has averaged 2.3% year-to-date and is projected to average between 2% and 3% for 2021.

       “Underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy.

       The outlook, however, continues to be subject to global commodity price developments and policy measures to alleviate the cost burden of the public. Underlying inflation, however, is expected to remain relatively subdued in 2022.”

       This is the seventh consecutive Monetary Policy Committee meeting in which the OPR has been retained at the record-low level.

       The last time the benchmark rate was revised was in July 2020, when the OPR was cut by 25 basis points from 2% to 1.75%.