KUALA LUMPUR, July 12 — Bank Negara Malaysia (BNM) is expected to increase the Overnight Policy Rate (OPR) by another 25 basis points this year, likely in the next Monetary Policy Committee (MPC) meeting on September 8, said OCBC Bank.
In a statement today, its chief economist Selena Ling opined that it might then pause in the last meeting of the year in November 2022 to assess the balance between inflation and recession risks before undertaking any action thereafter.
“Going forward, we see more rate hikes coming from BNM. Against the backdrop of rising global interest rate settings and some domestic inflation pressure, there is also a growing chance of back-to-back rate hikes rather than a more drawn-out cycle,” she said.
BNM has increased the OPR by 25 basis points to 2.25 per cent during its fourth MPC meeting this year.
Ling said such relative monetary policy tightening will occur at a time when the economy is likely to recover well, broadly speaking, even though the country might see a comparative slowdown in momentum due to global factors.
To that end, it is heartening to note that Malaysia had started the year on a strong footing, with the gross domestic product (GDP) growth clocking a higher-than-expected of 5.0 per cent year-on-year (y-o-y).
Still, the potential headwinds posed by a slowdown in the major economies are likely to present tougher times for the Malaysian economy.
“As fortunate as it is to enjoy a domestic demand uplift, the exports component cannot be ignored, on its own and on account of how it feeds to the overall economy through employment recovery, especially,” she said.
Hence, she said even though OCBC’s forecast for the full-year GDP growth would naturally go up to account for the upside surprise in the first quarter (Q1), the outturn for the later parts of the year looks less promising than before.
“In net terms, we now see the full-year 2022 growth at 5.7 per cent y-o-y, a measured uptick from 5.4 per cent before.
“Furthermore, should growth outturns in major export destinations such as China and the US slow down markedly from here, Malaysia’s growth trajectory will be weighed down as well unfortunately, even if remains respectable,” she added.