As global uncertainties are on a softer tone, BNM is likely to be in no hurry to change its neutral stand on the OPR rates for an unspecified time
By ASILA JALIL / Pic By MUHD AMIN NAHARUL
BANK Negara Malaysia (BNM) is likely to hold the Overnight Policy Rate (OPR) steady at 3% at the upcoming Monetary Policy Committee (MPC) meeting tomorrow.
The central bank is also expected to signal the market that it is in no hurry to change its neutral stand on the OPR rates for an unspecified time.
“The labour market is pretty much stable with unemployment rate remains low at 3.2% in November, while spending among consumers is still fairly steady. In that sense, the BNM would be mindful as to not overly stimulate the economy as the central bank would want to conserve its resources,” said Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.
A cut in the policy rate would warrant positive growth in the marker, said AmBank group chief economist and head of research Dr Anthony Dass in the Global Markets Report.
“Global uncertainties are on a softer tone. If a rate cut does takes place in January, it can be viewed positively as it should provide positive impetus to private consumption which is the anchor for growth and investment, complemented by exports in 2020,” said Dass.
The policy rate was left unchanged in the last MPC meeting in November 2019. The central bank last reduced the OPR by 25 basis points (bps) in May 2019 on indications of tightening financial conditions.
Prior to that, BNM increased the rate by 25bps in January 2018 to 3.25%.
A Reuters poll of 14 economists revealed BNM is expected to hold the OPR at 3% following improvements in global confidence on the back of preliminary trade deal signed by the US and China last week after the 18-month trade rift slowed global growth.
Similarly, OCBC Banking Corp Ltd chief economist and head of treasury research and strategy Selena Ling expects the central bank will proceed cautiously and tweak the rates accordingly in response to economic growth.
She said last week a rate cut of 25bps in the first half of 2020 (1H20) was expected and the central bank might retain a dovish bias and trim further if the global economy failed to strengthen and help the export sector.
Similarly, Standard Chartered Bank (M) Bhd (StanChart) expects a slash of 25bps as BNM maintains its focus on growth amid higher inflationary pressures.
“We expect the second-round inflationary effects the change in the fuel price mechanism to be limited given lacklustre growth. Sequential growth has been slowing since the fourth quarter of 2018, but given the improvement in the external environment, we expect BNM to adopt a wait-andsee stance,” StanChart said in its Global Research Briefing 2020 last week.