KUALA LUMPUR - Research houses see the possibility of Bank Negara Malaysia (BNM) maintaining its overnight policy rate (OPR) rate at the current level for a longer time, following the pause in January and March.
Kenanga Research said this view is further backed by the Monetary Policy Committee’s (MPC) primary aim to "calibrate the monetary policy settings that balance the risks to domestic inflation and sustainable growth”, and that "further normalisation to the degree of monetary policy accommodation would be informed by the evolving conditions and their implications to the domestic inflation and growth outlook."
"Given that growth and inflation outlook are expected to moderate this year amid downside risk from the external front, we foresee a small probability that BNM will resume its rate hike in the near term.
"Therefore, barring unforeseen external and domestic shocks on growth and inflation outlook, we expect the OPR to remain unchanged at 2.75 per cent for the rest of the year,” it said in a note today.
In a separate note, Public Investment Bank said, with subsidies still in effect, it maintained the view that BNM will likely retain its wait-and-see stance by pausing and keeping the OPR unchanged at 2.75 per cent at the May MPC meeting.
"However, while the future decision will be data-dependent, we see the likelihood of another 25 basis points (bps) rate hike to 3.00 per cent in the second half of 2023 (2H 2023), within its pre-pandemic level, but this hinges on possible fuel subsidy rationalisation in 2H 2023.
Meanwhile, CGS-CIMB Securities has also maintained its outlook for an end-2023 forecast (F) OPR of 3.25 per cent, with a pause in 1H 2023F and two 25bps hike in 2H 2023F.
"From our perspective, BNM should turn hawkish in 2H 2023F due to several factors, including China’s reopening which has finally led to a turnaround in its economy with a strong pickup in February purchasing managers index, alluding to positive spillover effects towards global growth,” it said in its Economics Update.
Hong Leong Investment Bank (HLIB) has maintained its expectation for BNM to increase OPR by another 25bps as early as May, bringing the rate to 3.00 per cent by year-end.
"According to the MPC, the current stance of monetary policy remains accommodative and supportive of economic growth. However, the committee did mention that it will remain vigilant to cost factors, including those arising from financial market developments, which could affect the inflation outlook,” it said in its Economics report.
As for Maybank Investment Bank (Maybank IB), it said the central bank decided to stay on "pause” mode as Monetary Policy Statement (MPS) indicated that it is still assessing the impact of last year’s cumulative 100bps OPR hikes given the lag effect of the monetary policy on the economy 12-18 months after the start of the OPR hike cycles in May 2022.
"MPS also retains the words 'further normalisation', implying current pause does not mean the end of OPR hike cycle. We expect another 25bps hike to bring OPR back to pre-COVID 19 level of 3.00 per cent, with our eyes on the next three MPC meetings on May 2-3, July 5-6, and Sept 6-7 this year.
"The MPS added that it is keeping an eye on cost factors - including those arising from financial market development - that could affect inflation outlook,” Maybank IB said in its Economics report. -Bernama
Kenanga Research said this view is further backed by the Monetary Policy Committee’s (MPC) primary aim to "calibrate the monetary policy settings that balance the risks to domestic inflation and sustainable growth”, and that "further normalisation to the degree of monetary policy accommodation would be informed by the evolving conditions and their implications to the domestic inflation and growth outlook."
"Given that growth and inflation outlook are expected to moderate this year amid downside risk from the external front, we foresee a small probability that BNM will resume its rate hike in the near term.
"Therefore, barring unforeseen external and domestic shocks on growth and inflation outlook, we expect the OPR to remain unchanged at 2.75 per cent for the rest of the year,” it said in a note today.
In a separate note, Public Investment Bank said, with subsidies still in effect, it maintained the view that BNM will likely retain its wait-and-see stance by pausing and keeping the OPR unchanged at 2.75 per cent at the May MPC meeting.
"However, while the future decision will be data-dependent, we see the likelihood of another 25 basis points (bps) rate hike to 3.00 per cent in the second half of 2023 (2H 2023), within its pre-pandemic level, but this hinges on possible fuel subsidy rationalisation in 2H 2023.
Meanwhile, CGS-CIMB Securities has also maintained its outlook for an end-2023 forecast (F) OPR of 3.25 per cent, with a pause in 1H 2023F and two 25bps hike in 2H 2023F.
"From our perspective, BNM should turn hawkish in 2H 2023F due to several factors, including China’s reopening which has finally led to a turnaround in its economy with a strong pickup in February purchasing managers index, alluding to positive spillover effects towards global growth,” it said in its Economics Update.
Hong Leong Investment Bank (HLIB) has maintained its expectation for BNM to increase OPR by another 25bps as early as May, bringing the rate to 3.00 per cent by year-end.
"According to the MPC, the current stance of monetary policy remains accommodative and supportive of economic growth. However, the committee did mention that it will remain vigilant to cost factors, including those arising from financial market developments, which could affect the inflation outlook,” it said in its Economics report.
As for Maybank Investment Bank (Maybank IB), it said the central bank decided to stay on "pause” mode as Monetary Policy Statement (MPS) indicated that it is still assessing the impact of last year’s cumulative 100bps OPR hikes given the lag effect of the monetary policy on the economy 12-18 months after the start of the OPR hike cycles in May 2022.
"MPS also retains the words 'further normalisation', implying current pause does not mean the end of OPR hike cycle. We expect another 25bps hike to bring OPR back to pre-COVID 19 level of 3.00 per cent, with our eyes on the next three MPC meetings on May 2-3, July 5-6, and Sept 6-7 this year.
"The MPS added that it is keeping an eye on cost factors - including those arising from financial market development - that could affect inflation outlook,” Maybank IB said in its Economics report. -Bernama