Bank Negara likely to maintain OPR - analysts

 

Bank Negara Malaysia is expected to maintain the overnight policy rate (OPR) at 1.75 percent during the monetary policy committee meeting in July, said analysts.

AmBank Research said this was despite heightened uncertainties driven by the pandemic that had added risk on growth due to supply chain disruptions and delay to the reopening of the economy.

“And with the focus to manage the pandemic, speed of vaccination and testing plus quarantine, this would mean any rate hike by the bank is unlikely to happen in 2021, but more so in 2022,” it said in a note today.

The research house said headline inflation, which lost some steam in May, was expected to hover around 3.0 percent to 3.5 percent for the full year (BNM's forecast: 2.5 percent-4.0 percent).

"This would mean the average inflation for the next seven months would be around 3.6 percent to 4.5 percent,” it said.

Meanwhile, CGS-CIMB projected that the central bank would leave the OPR at 1.75 percent in the second half of 2021.

It said this was because further deceleration in headline inflation was expected for the rest of the year, reflecting the stockbroking firm's annual inflation forecast for 2021 at 3.1 percent year-on-year (y-o-y).

“The full movement control order will likely keep the economy operating below potential for an extended period of time, warranting an accommodative monetary policy,” it said.

The country's headline inflation eased to 4.4 percent y-o-y in May from 4.7 percent y-o-y in April, undershooting its and market expectations of 4.7 percent y-o-y.

CGS-CIMB said price gains were soothed by government policies, demand pullback as the movement restrictions were tightened, and revisions to last year’s base, which tempered the upward influence on annual inflation.

- Bernama