StanChart expects Bank Negara to hold OPR at 3.25pc

KUALA LUMPUR: Standard Chartered Global Research (StanChart) expects Bank Negara Malaysia to keep the Overnight Policy Rate (OPR) at 3.25 per cent at the fourth Monetary Policy Committee meeting tomorrow and maintain a neutral stance.

It said the zero-rating of the Goods and Services Tax (GST) effective June 1 was likely to result in a one-off dip in inflation.

“However, Bank Negara is likely to look past the volatility in inflation and focus on growth in its monetary policy decision-making.

“We maintain status-quo call for this year as we expect growth to moderate from the strong levels last year but remain firm,” said the research house yesterday.

However, StanChart noted a potential risk to its call, if the ringgit faced strong depreciation pressure on broader weak risk sentiment, the central bank may need to hike its rates to maintain foreign exchange stability.

Meanwhile, the May industrial production index (IPI), to be released by the Statistics Department on Thursday, was expected to show growth easing to 2.8 per cent year-on-year (y-o-y) from 4.6 per cent y-o-y in April due to fewer working days following the general election.

It added that the mining sector was supported by a pick-up in crude oil production (3.4 per cent y-o-y), likely due to higher oil prices.