ALL EYES ON BANK NEGARA MEETING
Majority of economists in Reuters poll see 25 bps cut to historic low of 1.75pc
BANK Negara Malaysia’s Monetary Policy Committee meeting next week will be keenly watched for the policymakers’ latest assessments of the country’s economic outlook.
Malaysia has so far introduced stimulus packages totalling RM295 billion to soften the impact of the Covid-19 pandemic.
IHS Markit said it was not expecting Bank Negara to lower the Overnight Policy Rate (OPR) as the latest economic data was showing improvements.
This could reduce appetite for further monetary measures just yet, it added.
However, a Reuters poll of 12 economists showed that a slim majority felt that Bank Negara would cut the key interest rate to a historic low.
The central bank, according to seven of the 12 economists, would likely cut the OPR by at least 25 basis points (bps) to 1.75 per cent, with two betting on a bigger 50 bps reduction.
The remaining five expect the key rate to stay at two per cent — already at a record low — after three consecutive reductions in as many meetings this year.
IHS Markit said Malaysia was one of several countries that had reported higher production trends last month.
“Last month’s PMI (Purchasing Managers’ Index) data showed encouraging signs of a rebound in the manufacturing sector, with production rising at a survey-record rate after factories reopened following the easing of Covid-19 restrictions,” it said.
Among the seven biggest Asean economies ranked by Manufacturing PMI, Malaysia and Vietnam were the only countries to have seen a modest increase in the production index.
The rest, including Indonesia, Singapore and Thailand, saw either marginal, modest or solid decrease in output.
Kenanga Research noted that the recovery of Malaysia’s manufacturing sector had gained traction last month with its first expansion in 21 months.
This was attributed to further reopening of economic activities under the Recovery Movement Control Order on June 10.
The firm said some factories were boosting their production rate in order to clear backlogs.
“New orders picked up to a sixmonth high, underpinned by improved domestic demand.”
The research firm also expects Bank Negara to slash its OPR by 25 bps next week.
“Along with the deflationary environment and active monetary easing by centrals banks in developed countries, we view that the central bank has ample room to embark on further easing,” it added.