OPR to stay at 3pc for rest of the year, say analysts
KUALA LUMPUR: Analysts project that Bank Negara Malaysia will keep the Overnight Policy Rate (OPR) at three per cent for the rest of the year.
Hong Leong Investment Bank Bhd (HLIB Research) said the central bank maintained a positive outlook on Malaysia’s growth prospects, fuelled by firm domestic demand and favourable exports.
The research firm said inflation was forecast to remain moderate but sensitive to potential shifts in domestic policies and global circumstances.
“Separately, the ringgit’s performance is improving following Bank Negara’s engagement measures to encourage the conversion of foreign investment income.
“Pending details on the subsidy rationalisation plan as well as other income supporting measures, we expect Bank Negara to keep the OPR at three per cent for the rest of the year,” it said.
Public Investment Bank Bhd (PublicInvest) said Bank Negara had duly recognised that the global economy continued to expand amid resilient labour markets in some countries and continued recovery in global trade.
Looking forward, the research firm said the trajectory of global growth was anticipated to maintain its momentum, with prevailing headwinds stemming from tightened monetary policies and reduced fiscal support being mitigated by favourable labour market dynamics and a tempered inflationary environment.
“While recent months have witnessed a gradual decline in both headline and core inflation on a global scale, the deceleration in disinflationary trends within certain advanced economies suggests a potential prolonging of elevated interest rates, particularly in the United States.
“However, the outlook for growth remains susceptible to downside risks, chiefly emanating from potential escalations in geopolitical tensions, unforeseen spikes in inflationary pressures, and fluctuations in global financial markets,” it said.
PublicInvest said recent developments reinforced its stance on the OPR staying at three per cent this year.
It said the robust inflationary and economic indicators in the US suggest a potential deceleration or moderation in the US Fed Funds Rate (FFR) cuts, bolstering the strength of the US dollar and placing pressure on the ringgit.
“Consequently, our revised forecast for ringgit stands within 4.554.65 by the end of the year,” it added.
Meanwhile, CIMB Research said Bank Negara’s decision to maintain the OPR at three per cent for the sixth consecutive meeting was widely anticipated.
The research firm said the market’s response to Bank Negara’s OPR decision was muted, with the ringgit closing unchanged.
Bank Negara also announced plans to facilitate the pre-approval of overseas reinvestments for firms, aiming to incentivise the repatriation of foreign proceeds.
“Bank Negara is working to pilot a fast-track pre-approval framework for corporates to reinvest overseas, should they opt to bring back their foreign currency funds and convert to ringgit.
“The pilot project was considered after it was found that many corporates were not bringing their foreign currency balances back to avoid the approval process for reinvesting abroad,” said CIMB Research.