KUALA LUMPUR - Bank Negara Malaysia’s (BNM) decision to raise the overnight policy rate (OPR) by 25 basis points shows that Malaysia’s economy is resilient, say economists.
Rakuten Trade head of equity sales Vincent Lau said the OPR increase, after pausing in January and March this year, would likely be the final round of revision for 2023.
"The rate hike was indeed a surprise move as consensus views expected no hike this time around,” he told Bernama.
Nevertheless, he said banking stocks would set to benefit from the announcement made by BNM during its Monetary Policy Committee meeting today to increase the OPR by 25 basis points to 3.00 per cent, which has brought back the benchmark interest rate to pre-crisis levels.
Likewise, MIDF Research anticipated that the OPR to remain status quo at least until the end of 2023, and believed the current focus of BNM’s monetary policy setting was to ensure a sustainable growth momentum of Malaysia’s economy.
"With OPR restored to pre-pandemic levels, we believe BNM will shift to a wait-and-see approach, especially monitoring major central banks’ developments,” it said.
If Malaysia’s domestic economy improves better than expected, the research house expects BNM to optimise its monetary arms by normalising its Statutory Reserve Requirement (SRR) from 2.00 per cent to 3.00 per cent this year.
However, MIDF Research said the decision is subject to the stability of economic growth, the pace of price increases and a further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.
Furthermore, it said the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as persistently high inflation and further rise in household indebtedness from a medium-term perspective.
On the ringgit performance, MIDF Research said the local note is fundamentally in a good position as the domestic economy is on an upbeat momentum and as a net exporter of crude petroleum, liquefied natural gas (LNG) and palm oil, Malaysia stands to benefit from the elevated global commodity prices.
The research house is optimistic that the ringgit would appreciate faster once the United States Federal Reserve hit the pause button, hence keeping its forecast for USD/MYR to average at RM4.20 per US$1 and ending the year 2023 at RM4.00.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist and social finance Dr Mohd Afzanizam Abdul Rashid said BNM has a comfortable policy space to use when there is a need to respond to economic shocks at a 3.00 per cent level.
"This is especially true when global growth prospects are likely to be challenging going forward owing to tight global liquidity conditions as well as higher inflation rates,” he said, adding that the OPR increase came at just about the right time.
In addition, OCBC Bank said that with BNM assessing that the monetary policy stance is slightly accommodative and remains supportive of the economy, it has signalled that looser monetary policy conditions were not on the cards for now.
"Looking ahead, we expect BNM to remain on hold for the rest of 2023,” it added. - BERNAMA
Rakuten Trade head of equity sales Vincent Lau said the OPR increase, after pausing in January and March this year, would likely be the final round of revision for 2023.
"The rate hike was indeed a surprise move as consensus views expected no hike this time around,” he told Bernama.
Nevertheless, he said banking stocks would set to benefit from the announcement made by BNM during its Monetary Policy Committee meeting today to increase the OPR by 25 basis points to 3.00 per cent, which has brought back the benchmark interest rate to pre-crisis levels.
Likewise, MIDF Research anticipated that the OPR to remain status quo at least until the end of 2023, and believed the current focus of BNM’s monetary policy setting was to ensure a sustainable growth momentum of Malaysia’s economy.
"With OPR restored to pre-pandemic levels, we believe BNM will shift to a wait-and-see approach, especially monitoring major central banks’ developments,” it said.
If Malaysia’s domestic economy improves better than expected, the research house expects BNM to optimise its monetary arms by normalising its Statutory Reserve Requirement (SRR) from 2.00 per cent to 3.00 per cent this year.
However, MIDF Research said the decision is subject to the stability of economic growth, the pace of price increases and a further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.
Furthermore, it said the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as persistently high inflation and further rise in household indebtedness from a medium-term perspective.
On the ringgit performance, MIDF Research said the local note is fundamentally in a good position as the domestic economy is on an upbeat momentum and as a net exporter of crude petroleum, liquefied natural gas (LNG) and palm oil, Malaysia stands to benefit from the elevated global commodity prices.
The research house is optimistic that the ringgit would appreciate faster once the United States Federal Reserve hit the pause button, hence keeping its forecast for USD/MYR to average at RM4.20 per US$1 and ending the year 2023 at RM4.00.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist and social finance Dr Mohd Afzanizam Abdul Rashid said BNM has a comfortable policy space to use when there is a need to respond to economic shocks at a 3.00 per cent level.
"This is especially true when global growth prospects are likely to be challenging going forward owing to tight global liquidity conditions as well as higher inflation rates,” he said, adding that the OPR increase came at just about the right time.
In addition, OCBC Bank said that with BNM assessing that the monetary policy stance is slightly accommodative and remains supportive of the economy, it has signalled that looser monetary policy conditions were not on the cards for now.
"Looking ahead, we expect BNM to remain on hold for the rest of 2023,” it added. - BERNAMA