Bank Negara seen to keep OPR at 3pc throughout this year
Bank Negara Malaysia is expected to maintain the Overnight Policy Rate (OPR) at three per cent throughout this year, said UOB Global Economics and Market Research.
The research firm said in a note yesterday this was due to the balance of risks to growth and inflation, and also pending the details of the subsidy rationalisation measures.
“Bank Negara highlighted in its Economic and Monetary Review (EMR) 2023 that when relative price adjustments are transitory and likely to normalise over a reasonable period of time, it may not require a monetary policy response.
“This reaffirms our OPR call given the past experiences of subsidy rationalisation that resulted in just transitory effects (which dissipate within one year).”
According to UOB, the only wildcard to its OPR projection is the wage-price spiral risk, as the government is currently selecting 1,000 companies to pilot-test the progressive wage policy starting in June.
Additionally, it said the government was reviewing civil servants’ pay scheme, which was expected to be announced in the 2025 Budget.
CIMB Treasury and Markets Research has also reiterated its view of an extended OPR pause at three per cent through this year.
It said this was due to the central bank’s positive growth prognosis, forthcoming administered price policy-driven inflation risks and efforts to mitigate near-term foreign exchange volatility.
It said these factors diminished the temptation to follow global central banks in their preparations to begin cutting interest rates.