Bank Negara Malaysia (BNM) and the Monetary Policy Committee (MPC) will hold its meeting on 7 September to decide whether it will change the overnight policy rate (OPR) again.
But what do experts think will happen to the OPR? Will they maintain the current 3% or raise it up?
Maintaining the OPR at 3% till year-end
A poll conducted by Reuters among economists believes that BNM will not make any changes and hold the key policy rate at 3%, adopting the same no-change stance as most of its Asian peers amidst signs of moderating economic growth and cooling inflation.
The central bank, which doesn’t particularly target inflation by setting monetary policy, said that the inflation will continue to cool down as it hits a two-year low of 2% in July among Southeast Asian countries.
Similar views were shared by OCBC’s senior ASEAN economist Lavanya Venkateswaran who believes that BNM will keep its monetary policy stance on hold until the end of the year.
“We believe that BNM is now more sanguine about the growth and inflation outlooks but stopped short of sounding less hawkish,” he said in a note issued after the central bank’s decision to keep the OPR at 3% back in July.
A slight raise on the OPR
While the majority of experts believe that BNM is likely to maintain the OPR at 3%, there are a few who think a slight hike is coming.
CGS-CIMB Research economists Nazmi Idrus and Mas Aida Che Mansor said that a bump of 25 basis points (bps) will be introduced by BNM after the 7 September meeting.
“We believe there could be one more OPR hike by end-2023 to 3.25%. A key risk is whether a global slowdown could be sharper than expected. If this happens, there is a possibility that Bank Negara Malaysia (BNM) may halt the rate hike cycle despite ongoing improvements in the domestic economy,” they said in a report for investors.
Despite the positive outlook on the economy, demonstrated by the formal announcement of the lifting of the COVID-19 monetary stimulus, the report by CGS-CIMB highlighted key risks that could lead to a rise in OPR.
One such key risk is whether a global slowdown could be sharper than expected. If it happens, then there is a possibility that BNM may halt the rate hike cycle despite ongoing improvements in the domestic economy.
Read more: BNM Keeps OPR At 3.00%
