Bank Ne­gara ex­pected to main­tain key rate, SRR un­til Q3 next year

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: AmBank Re­search ex­pects Bank Ne­gara Malaysia to main­tain its Overnight Pol­icy Rate (OPR) and statu­tory re­serve re­quire­ment (SRR) at 3% and 3.5% for 2016 un­til the third quar­ter of 2017, af­ter the cen­tral bank took no ac­tion at the last Mone­tary Pol­icy Com­mit­tee meet­ing.

“We have placed a low 30% prob­a­bil­ity of a rate hike by 25 ba­sis points in 4Q2017 on the back of 2-3 rate hikes by the US Fed, pick-up in in­fla­tion and steady do­mes­tic gross do­mes­tic prod­uct growth by 4.5% in 2017,” the bankbacked re­search firm said in its note yes­ter­day.

The com­mit­tee on Wed­nes­day said it be­lieves that fis­cal stim­u­lus in de­vel­oped economies could re­sult in a more bal­anced pol­icy en­vi­ron­ment that will be sup­port­ive of growth. How­ever, risks of pro­tec­tion­ism and fi­nan­cial mar­ket volatil­ity are a cause for con­cern.

Pri­vate con­sump­tion re­mains the growth en­gine, sup­ported by sus­tained wage, sta­ble em­ploy­ment, in­crease in min­i­mum wage with ef­fect from July 1, 2016 and fiz­zling of the Goods and Ser­vices Tax im­pact.

On­go­ing in­fra­struc­ture in­vest­ments and cap­i­tal ex­pen­di­ture in both man­u­fac­tur­ing and ser­vices sec­tors will con­tinue to boost in­vest­ment ac­tiv­i­ties.

Mean­while, ex­port ex­pan­sion will be con­strained by ex­ter­nal head­winds and weak prices while head­line in­fla­tion is pro­jected to re­main tame amid sub­dued global in­fla­tion.

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