Kenanga expects BNM to maintain 3.25 per cent OPR until year end

KUALA LUMPUR: Kenanga Investment Bank Bhd expects Bank Negara Malaysia (BNM) to hold its Overnight Policy Rate (OPR) at 3.25 per cent until the end of the year on supportive economic growth.

Kenanga said the US Federal Reserve has signalled two more rate hikes by year-end, which may trigger more fund outflow from emerging markets.

“The possibility that the current trade tension would escalate and turn into a global trade war would also adversely affect the markets,” the investment bank said in a report yesterday.

Besides maintaining the OPR at that level, BNM via its fourth monetary policy committee meeting also left the statutory reserve requirement (SRR) rate unchanged at 3.50 per cent. BNM also sees lower inflation. “In line with our reading, BNM said that the headline inflation for 2018 is projected to be lower than earlier forecast taking into consideration the impact of recent policy measures on domestic cost factors.

“The impact of these measures, namely the zero-rating of the Goods and Services Tax and fuel subsidy, on inflation, according to BNM “is transitory, and on this note, it is highly expected that the official consumer price index (CPI) forecast of 2.0 per cent-3.0 per cent for 2018 will be revised,” it said.

Kenanga Investment had earlier revised its 2018 CPI forecast to 1.8 per cent from 2.8 per cent.

The next MPC meeting will be on Sept 5. — Bernama