PETALING JAYA: Bank Negara Malaysia (BNM) today increased the Overnight Policy Rate (OPR) by 25 basis points (bps) to 2.50%, marking the third consecutive hike this year.
The OPR was at a record low of 1.75% from July 2020 to May 2022 due to the Covid-19 pandemic. The central bank’s Monetary Policy Committee (MPC) increased the rate by 25bps at its May 11 meeting, and again by the same quantum on July 6.
“With the positive growth prospects for the Malaysian economy remaining intact, the MPC decided to further adjust the degree of monetary accommodation. At the current OPR level, the stance of monetary policy continues to remain accommodative and supportive of economic growth,” the MPC said in a statement.
It pointed out that it is not on any preset course and will continue to assess evolving conditions and their implications on the overall outlook to domestic inflation and growth.
“Any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability.”
MIDF Research believes the current focus of BNM’s monetary policy setting is to ensure a sustainable recovery of Malaysia’s economy.
“With the rising core inflation trend and stronger-than-expected domestic demand, we expect further policy normalisation will likely be carried out in November with another 25bps hike,” the research house said, adding that the OPR will likely end the year at 2.75%.
From a medium-term perspective, MIDF said the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as persistently high inflation and a further rise in household indebtedness.
MARC Ratings expect BNM to remain on a rate tightening path. It foresees the MPC, given its stated preference for measured and gradual monetary policy adjustments to support sustainable economic growth amid price stability, increasing the OPR by another 25bps to 2.75% at its November 2022 meeting.
However, UOB Research thinks BNM may have signalled a pause in rate hikes pending forward-looking growth and inflation dynamics. “As such, we maintain our OPR target at 2.50% by year-end, and 3.00% by mid-2023. The next and final monetary policy meeting for the year is on Nov 2-3,” it said.