PETALING JAYA: Bank Negara Malaysia (BNM) is expected to keep the Overnight Policy Rate (OPR) unchanged at 3% at tomorrow’s monetary policy meeting following the 25-basis point cut in May, according to Standard Chartered Research.
It said the central bank’s last policy stance sounded neutral.
“The rate cut in May was intended to address some signs of financial conditions tightening, rather than any significant growth deterioration or fall in inflation,” it said in research note
“While, downside risk to growth is expected to remain, we think the May cut was pre-emptive and expect the central bank to remain watchful.”
Standard Chartered expects Malaysia’s growth to remain above 4.5% year on year with stable core inflation (excluding tax changes effect) at 1.6%.
Meanwhile, it noted that the Monetary Conditions Index indicated that monetary conditions have loosened in Malaysia.
“The policy rate cut, a weaker real effective exchange rate and a slight improvement in money-supply growth have contributed to looser conditions.”
Malaysia’s gross domestic product growth moderated to 4.5% in the first quarter of 2019 from 4.7% in the fourth quarter of 2018, on the back of a significant decline in private investment.
Despite that, BNM is maintaining its baseline projection of 4.3%-4.8% growth for the year amid escalating tensions in global trade.
Governor Datuk Nor Shamsiah Mohd Yunus said the projection has taken into account the US-China trade war, including the latest tariff increase.
Meanwhile, the central bank expects inflation to remain low in the immediate term, mainly due to policy measures such as the price ceiling on domestic retail fuel prices until mid-2019 and the impact of the changes in consumption tax policy on headline inflation.
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