Muristek
The Bank Negara Malaysia logo is seen at its headquarters in Kuala Lumpur January 23, 2020. — Picture by Ahmad Zamzahuri
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KUALA LUMPUR, April 22 — RHB Bank Bhd has maintained its view that Bank Negara Malaysia (BNM) would hold the overnight policy rate (OPR) at 1.75 per cent at the central bank’s May 11 monetary policy meeting.
In a research note today, group chief economist and head of market research Dr Sailesh K. Jha said the central bank would hike the OPR by 25 basis point to 2.0 per cent in the second half of 2022 (H2 2022).
“BNM will also decide on its OPR hike based on the release of the first quarter of 2022 (Q1 2022) gross domestic product (GDP) figures on May 13 and April core CPI data on May 25 as well as further evidence that slack in the economy is falling, real wages are on a firm uptrend and that risks from the conflict in Ukraine do not have material impact on Malaysia’s economy.
“In addition, BNM will want to observe how the recent weakness in the ringgit and the local currency bond market will play out, whether it is temporary or durable as we exit the May 5 US Federal Reserve Bank (Fed) FOMC meeting,” he said.
Sailesh said that according to the range of indicators BNM examine when undertaking policy decisions, RHB believes that BNM will not have sufficient evidence to hike the OPR on May 11.
“The guidance, however, on the path of monetary policy could be given at this meeting,” said Sailesh.
On the data front, the evidence per official monthly data showed that the momentum of industrial production stabilised and retail sales accelerated a bit in February, the momentum of core CPI inflation as of March is up, while the momentum of headline CPI is down, and the momentum of real exports and imports GDP on a quarter-on-quarter basis most likely decelerated in Q1 2022 after strong performance in the fourth quarter of 2021.
Hence, for BNM, the outlook for growth and inflation still warrants patience rather than rushing to adjust the OPR and follow what markets are pricing in currently for aggressive hikes in 2022, he said.
Meanwhile, RHB also maintained its 2022 Consumer Price Index (CPI) inflation forecast of 2.6 per cent year-on-year (y-o-y) versus the Bloomberg consensus estimate of 2.4 per cent and the 2021 print of 2.5 per cent.
“March core CPI inflation data release was in line with our expectation where-in we had expected a print of 2.0 per cent y-o-y by April and the March print was 1.98 per cent.
“Looking forward, we expect the core CPI in April and May to be around 2.0 per cent to 2.18 per cent and 2.2 per cent to 2.40 per cent y-o-y respectively,” he said. — Bernama