BANK NEGARA LIKELY TO KEEP OPR UNCHANGED

However, research houses caution about hike next year

BANK Negara Malaysia is likely to keep the key benchmark interest rate unchanged today, in its last monetary policy statement of the year.

The Overnight Policy Rate (OPR) has remained unchanged since July last year.

While market expectations are unanimous about the central bank standing pat this year, some research houses have cautioned about a likely hike next year.

AmBank, Maybank Investment Bank and RHB Research are among those expecting a 25 basis points hike next year.

HSBC Bank said given the inflation lying above Bank Negara’s comfort range and robust gross domestic product growth in the first half of this year, “Malaysia is a potential candidate for monetary policy tightening”.

The Consumer Price Index in September rose to 4.3 per cent year-on-year.

“However, we expect inflation to moderate towards the end of the year as food prices are trending down.”

It also expects the economy to moderate in the second half of the year. With an appreciating ringgit, Bank Negara will not change any of its policy tools, keeping both domestic and external conditions stable.

Bloomberg Intelligence also said a stabilising ringgit will ease price pressures for tradeables. But it cautioned about the challenges next year, with the general election, deleveraging in China and more synchronised tightening by major central banks.

On the monetary policy committee meeting, Edward Lee of Standard Chartered Bank said market participants will likely focus on the tone of the policy statement.

“In the last statement in September, the central bank acknowledged the stronger-thanexpected growth but maintained its view that core inflation will remain contained. We believe the core inflation trend will be key in determining whether the central bank tightens monetary policy.”

We believe the core inflation trend will be key in determining whether the central bank tightens monetary policy.

EDWARD LEE Standard Chartered Bank economist

He also said Bank Negara’s nuanced change to its view that monetary policy “remains” accommodative from “is” accommodative.

“This is a subtle shift towards a slightly more hawkish stance, in our view.”