Selangor Journal

BNM’s unchanged OPR to ensure sustainable economic growth — MIDF Research

KUALA LUMPUR, March 9 — MIDF Amanah Investment Bank Bhd Research (MIDF Research) believes the current focus of Bank Negara Malaysia’s (BNM) monetary policy setting is to ensure a sustainable growth momentum of Malaysia’s economy.

In its 2023 second Monetary Policy Committee (MPC) meeting today, BNM has retained the overnight policy rate (OPR) at 2.75 per cent, in line with market consensus.

Commenting on that, the research house opined that the central bank is taking a wait-and-see approach to assess the market performances after a 100 basis points (bps) increase made last year, whereby the OPR was raised to 2.75 per cent from a historical low of 1.75 per cent since July 7, 2020.

“However, we believe the possibility for further normalisation of monetary policy remains, given that domestic economic data is still showing upbeat momentum.

“With the rising core inflation trend and stronger-than-expected domestic demand, we expect the central bank to restore its monetary bullets to pre-pandemic levels of 3.00 per cent in the first half of 2023,” it said in a note today.

MIDF Research also opined that the central bank would normalise its Statutory Reserve Requirement (SRR) to 3.00 per cent this year after the SRR rate was reduced to 2.00 per cent since March 2020.

However, it said the decision would be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.

“From a medium-term perspective, 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,” it said.

On the ringgit performance, the research house foresees the local note to average higher at RM4.20 against the US dollar and end 2023 at RM4.00 despite higher-than-expected United State Federal Reserve interest rates in 2023.

“Fundamentally, the ringgit is in a good position as the domestic economy stays on an upbeat momentum, as Malaysia, being a net exporter of crude petroleum, liquefied natural gas (LNG) and palm oil, stands to benefit from the elevated global commodity prices.

“On top of that, the re-tabling of Budget 2023 provided a clearer fiscal direction of the country, especially under the new coalition government,” it said.

— Bernama

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