KUALA LUMPUR – Bank Negara Malaysia (BNM) is expected to increase the key overnight policy rate (OPR) by another 25 basis points (BPS) consecutively in an effort to stem inflation due to a weak ringgit and on the back of the US Federal Reserve raise.
This comes after the central bank raised its OPR by 25 BPS to 2.00% during its May meeting. If the OPR is raised this month, it will bring it to 2.25%.
The last time BNM consecutively raised its rate was in mid-2010, reported Reuters.
Malaysia’s inflation rate was at 2.8% in May while the ringgit dropped almost 6%, as the country struggles with the rising cost of living and food prices, especially for imported items.
The 22 economists in a Reuters poll expected the 25 BPS raise in July, of which 12 said they are forecasting another 25-point hike in September, bringing the OPR to 2.50%.
As for November, 12 of them predicted that the OPR will reach 2.50% while eight expect it to be at 2.75%.
For next year’s first quarter, six analysts in the poll said the rates could reach pre-pandemic levels of 3.00%.
In May, BNM maintained this year’s economic growth forecast at 5.3%-6.3% and expected headline inflation to hover between 2.2% and 3.2%.
Last week, AmBank Research expected BNM to increase the OPR by 50 BPS when the bank meets this month.
In its research note, the research house also forecasted the country’s overall inflation to be between 2.8% and 3.0% this year.
The overall inflation in May 2022 stood at 2.8% year-on-year (y-o-y), bringing the all-year average inflation to 2.4% y-o-y. – The Vibes, July 4, 2022
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