KUCHING: Analysts across the board believe Bank Negara Malaysia (BNM) will likely keep its Overnight Policy Rate (OPR) at 3.25 per cent all the way through 2019 following Thursday’s decision to maintain the rate for its fifth consecutive time.
Likewise, the statutory reserve requirement (SRR) remained unchanged at 3.5 per cent, after a 50 basis points cut from four per cent in January last year.
The decision by BNM to hold rate at current level signals that the stance of monetary policy remains accommodative and supportive of Malaysia’s economy.
Researchers with AmBank Bhd (AmBank Research) found the tone of BNM to be “neutral” in the latest policy meeting.
“The economic growth will be supported by private sector activity with private consumption to be the main growth driver with investment supported by sustained capacity expansion despite risks arising from trade tensions, volatile financial markets and the US policy normalisation,” it said in a separate report.
Though headline inflation will be low in 2018, AmBank Research expected inflation to rise in 2019 due to higher global oil prices, the floating of domestic fuel prices and impact of the consumption tax policy.
“Looking ahead into 2019, we expect BNM to maintain the current OPR of 3.25 per cent for the first half of 2019 (1H19), with the aim to support the economic growth while maintaining inflationary pressure,” it added. “However, room for a rate hike is seen evident in the 2H2019 which will be data-driven.
“Should potential inflationary pressure continue to trend upwards, driven by stronger underlying inflation, we foresee a 25bps hike in 2H2019. We have been playing down on the possibility of a rate cut in 2019, and still maintain our view.”
Meanwhile, MIDF Amanah Investment Bank Bhd (MIDF Research) also believed the OPR would stay at 3.25 in 2018 and 2019.
“Amid balanced risk, we maintain our baseline view of a single rate hike in 2018 (in January 2018),” it stated in its own report.
“We expect domestic economy will continue to expand at a moderating pace in 2018. However, future developments in both internal and external fronts will determine the upcoming outlook of Malaysia monetary policy.”
These came on the back of BNM maintaining the OPR for its fifth consecutive meeting, which was widely expected and timely as macroeconomic indicators are reflecting moderating signs especially at the global front.
“We observe slight slowdown in external trade, industrialproduction and manufacturing sales performances in 3Q18 as compared to the same period last year,” MIDF Research added.
“Nevertheless, we expect GDP growth to remain solid this year, supported by robust domestic spending, continuous pick-up in global commodity prices, steady business confidence, stable labour market and moderating inflationary pressure. We estimate GDP growth for 2018 at 5.2 per cent.”