KUALA LUMPUR (Sept 5): Bank Negara Malaysia (BNM) is under no pressure to adjust its benchmark interest rate, despite global central banks leaning towards policy easing, thanks to stable inflation and a positive growth outlook, economists said.
BNM on Thursday announced that the overnight policy rate (OPR) will remain at 3% following the Monetary Policy Committee’s two-day meeting, which aligns with expectations from economists surveyed by Bloomberg.
This marks the eighth consecutive time the OPR has been held at 3%, after being raised by 25 basis points from 2.75% in May last year.
“We maintain our outlook that BNM will keep the OPR steady at 3% for the rest of the year and into 2025,” Kenanga Investment Bank (Kenanga IB) said in a note.
It added that the current rate remains slightly accommodative, supporting domestic economic expansion while keeping inflation in check, aided by government measures such as subsidies and cash transfers.
Kenanga IB also noted that global uncertainties, including slowing US growth and weak recovery in China, reinforce the need for Malaysia’s steady monetary policy.
“We maintain our 2024 GDP growth forecast at 5%, with a slight moderation to 4.8% expected in 2025,” it said.
RHB Investment Bank(RHB IB) identified three key factors influencing the OPR, including economic momentum, inflation trajectory and global interest rate trends.
“For the year ahead, we see little impetus for BNM to cut the OPR, owing to Malaysia’s relative resiliency in its economic indicators,” RHB IB said.
Similarly, MIDF Research maintained its projection that BNM will keep the OPR unchanged for the rest of the year, citing moderate inflation and controlled demand pressures.
It noted that while demand continues to grow, core inflation remains low.
Therefore, it expects BNM to focus on supporting the economy, as near-term growth may be constrained by slower growth in China, geopolitical risks, and potential slowdowns in advanced economies.
UOB Global Economics and Markets Research also expects BNM to continue to hold rates, as the central bank focuses on managing inflation amid strong domestic demand and a favourable labour market.
“While other central banks are moving towards easing cycles, a stable OPR will support the ringgit, which we forecast to be at 4.28 against the US dollar in the fourth quarter of 2024 (4Q24), 4.24 in 1Q25, and 4.20 in 2Q25,” it noted.
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Source: EdgeProp.my
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