PublicInvest: Monetary policy meeting seen as first task for Shamsiah

PETALING JAYA: The upcoming Monetary Policy Meeting will be seen as Datuk Nor Shamsiah Mohd Yunus’ (pic) first task as the new Bank Negara governor.

The closely-watched meeting, scheduled for July 11, is expected to assess the immediate impact of the brewing trade war between the United States and China, said PublicInvest Research.

“This could be a source of risk as Malaysia is the US’ eighth-largest trade partner with trade imbalance.

“The secondary impact should be real as well, especially when it can disrupt the supply and revenue chain due to our close trade integration with China and the US,” it said in a report.

The research house said it viewed Nor Shamsiah’s appointment as Malaysia’s ninth central bank governor positively, given that she had been a long-serving employee of the bank, while also being one of the deputy governors during Tan Sri Dr Zeti Akhtar Aziz’s tenure.

On the economic front, the research house noted that the country was undergoing a rapid and positive transition under the new federal government.

As a result of this, it said, any adjustment and rebalancing efforts could potentially cause a dent to the demand side of the economy, such as private and public investments.

It said this was especially so since the new government was committed to reducing wastage and cutting cost.

As projects like the Kuala LumpurSingapore high-speed rail and the MRT3 had been viewed as supportive towards the investment momentum, the decision to scrap or defer them may impact the sector’s performance, the research house added.

“Against this backdrop, we believe the central bank would not hesitate to step in to support the economy if necessary through its various monetary tools.

“Malaysia has been known to be unhesitant and acting ahead of the curve in recent times, evidenced very early on during the global credit crises and Brexit,” it said.

Given the long duration in seeing the impact of monetary intervention, the research house expects that the central bank will step in as soon as there are signs of economic weakness.

It added that the tepid inflation momentum in 2018 gives the central bank plenty of room to intervene in the policy rate, as this could result in a competitive real effective interest rate.

“Any policy rate intervention through a cut can spur not only the economy, but also the investing appetite which is a win-win strategy for all,” it said.