KUALA LUMPUR, July 6 — Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 3.0 per cent today is in line with market expectations, according to MIDF Research.
The central bank highlighted the global economy remains firm, underpinned by resilient domestic demand amid strong labour market conditions, the research house said in a note.
However, MIDF Research did not discount the possibility of another 25-basis point rate hike in the second half of 2023, given that domestic economic figures point towards an upbeat momentum.
It said that BNM may optimise its monetary arms by normalising its Statutory Reserve Requirement (SRR) from 2.00 per cent to 3.00 per cent this year.
“The SRR rate was reduced to 2.00 per cent in March 2020. However, the decision will be subjected to the stability of economic growth, the pace of price increases and a 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 by way of a persistently high inflation and a further rise in household indebtedness,” MIDF Research said.
As for the ringgit, it said that fundamentally, the local currency is in a good position as the domestic economy remains on an upbeat momentum.
“As a net exporter of crude petroleum, liquefied natural gas and palm oil, Malaysia stands to benefit from the elevated global commodity prices,” MIDF Research said.
However, it expects the ringgit to continue depreciating, as the US Federal Reserve keeps on delaying its interest rate pause.
— Bernama
