Bank Negara likely to maintain OPR

KUALA LUMPUR: Bank Negara Malaysia will likely keep the Overnight Policy Rate (OPR) at 3.0 per cent when it releases its monetary policy statement today.

Market analysts said the stellar economic growth performance in the second quarter had placed the central bank in a comfortable position for now.

The central bank’s monetary policy committee concludes its two-day meeting today. With inflationary pressures easing and reaching tame levels, potential risks have also abated.

Standard Chartered Bank economist Edward Lee instead sees a hike risk given the stellar growth so far and only slightly elevated core inflation.

“Our indicator suggests that monetary conditions are currently slightly loose... we think Bank Negara will maintain a watch-and-see stance for now.”

He noted that loan growth remained soft despite the recent pick-up while negative wage growth might also affect consumption later in the year.

“Headline inflation, while high, is heading lower and may provide less upside for core inflation.”

Lee also drew reference to the tone of Bank Negara’s last monetary policy statement, saying it was largely neutral and it appeared willing to tolerate a rise in core inflation in the interim.

HSBC Bank said the higher than expected gross domestic product growth in the second quarter had put the central bank in a comfortable position.

“We expect it to wait and access further data, especially when the United States Federal Reserve is in its hiking cycle.”

The research house said although headline inflation was above Bank Negara’s two to three per cent comfort range, it was trending down.

It expects the central bank to maintain the OPR this year.

Alliance Bank, in a recent note, cautioned that a surprise rate cut could negatively affect the ringgit’s exchange rate. Rupa Damodaran