UOB Malaysia expects BNM to stand pat on OPR

KUALA LUMPUR (May 9): Bank Negara Malaysia (BNM) is most likely to keep the overnight policy rate (OPR) unchanged at its monetary policy meeting this Friday, according to UOB Malaysia.

UOB Malaysia senior vice president of global economics and markets research Julia Goh is of the view that the central bank will keep the rate unchanged for this year. On what would trigger a rate hike from the central bank, Goh said that would depend on domestic demand.

"If BNM sees that there is stronger domestic demand and sustained inflationary pressures, then it may consider raising rates, but we are not seeing that at the moment. Domestic demand is still resilient, but it is showing some signs of moderation partly because BNM is projecting unemployment rate this year to be above 3.5%," she told reporters at a media presentation today.

She added that another trigger for a potential rate hike is the risk of a financial imbalance.

"However, we think that risk has been abated because we saw household debt slow down to a growth of 5.4% last year, or 88.4% of gross domestic product," said Goh.

In 2016, BNM said household debt grew 5.4% to RM1.09 trillion, from a year earlier. In 2015 and 2010, household debt expanded by 7.3% and 14.2% respectively.

Goh said it will also be highly unlikely for the central bank to cut the OPR.

"A view of a cut in the OPR has been abated due to turnaround in GDP growth [coming in at 4.5% in the fourth quarter of last year], and we expect GDP growth to be fairly stable this year [at 4.5%].

"[Moreover], there is pressure on the ringgit should there be a rate cut," she said. — theedgemarkets.com

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