PETALING JAYA: Ahead of Bank Negara Malaysia’s (BNM) monetary policy committee (MPC) meeting tomorrow, a majority of economists polled by Bloomberg appear confident the central bank will not make any changes to the overnight policy rate (OPR).
The poll today indicated that 16 out of 18 economists expect the OPR to be maintained at 2.75%. The OPR has been unchanged at this level since November 2022.
Only two institutions, the Bank of America National Association and Standard Chartered Bank expect a raise to 3%.
Outside of the Bloomberg poll, United Overseas Bank (UOB) was another bank that expects another OPR increase to 3% and for it to stay at that level, according to its note last Friday.
Inflation in Malaysia eased to 3.4% – a nine-month low – in March, with the consumer price index at 129.9.
Kenanga Investment Bank Bhd expects BNM to keep the OPR at 2.75% for the rest of 2023, barring an exceptional risk to growth in gross domestic product (GDP) and inflation outlook.
However, it noted a further adjustment by 25 basis points is not out of the question if inflationary pressure remains elevated.
“Given the uncertainty of the global growth outlook with the relatively weak external trade and commodity prices, we see a limited probability for BNM to further hike rates this year,” said Kenanga.
In a note, UOB senior economist Alvin Liew highlighted there was still room for the normalisation of monetary policy due to sticky core inflation and positive domestic growth momentum.
“(After hiking it to 3%), BNM will leave the OPR unchanged for the rest of the year, in (view) of a softer inflation outlook globally in the second half of 2023 (H2 2023), an expected end to global rate hike cycle by mid-2023, and rising recession risks in advanced economies,” said Liew.
In contrast to the consensus view, RHB economist Chin Yee Sian and associate research analyst Wong Xian Yong have maintained a peak OPR forecast of 3.25% with the balance of risks making 3% more likely.
This is in consideration of a longer-than-expected pause in policy normalisation and possible delays in subsidy rationalisation.
Subsidy rationalisation involves the highly anticipated targeted diesel subsidy, on which a draft mechanism is expected to be ready by H2 2023.
RHB echoed the concerns regarding core inflation momentum, although headline inflation had moderated due to the low interest rates environment.
“The negative carry for holding ringgit against the US dollar is unlikely to fade quickly in the short-term as the central bank is falling behind the inflation curve and is yet to provide concrete guidance on what the peak OPR is after having been in pause mode since November 2022,” they added.
Source: https://www.freemalaysiatoday.com/category/business/2023/05/02/economists-expect-bnm-to-maintain-opr-again/