Thailand
Malaysia: OPR stays at 3.25%
PETALING JAYA: The Overnight Policy Rate (OPR) has been maintained at 3.25%, with economists expecting the rate to be left unchanged through the first half of 2019.
The last change in the OPR was in January this year, when the interest rate was raised by 25 basis points (bps).
Bank Negara said in a statement yesterday that the degree of monetary accommodativeness was consistent with the intended policy stance at the current level of the OPR.
It added that the Monetary Policy Committee will continue to monitor and assess risks surrounding the outlook for domestic growth and inflation.
“Private consumption will remain the main driver of growth, supported by conducive labour market conditions.
“Investment activity is projected to be sustained by continued capacity expansion in key sectors, driven by positive demand and efforts to enhance automation,” it said.
The central bank said public sector spending, however, was likely to weigh on growth, amid the government’s continued reprioritisation of expenditure.
On the external front, it said exports were projected to provide an additional lift to growth, albeit to a lesser extent.
Moving forward, Bank Negara projects that headline inflation will increase in 2019, primarily due to higher projected global oil prices and the floating of domestic fuel prices.
“While the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of 2019.
“Underlying inflation is expected to remain contained in the absence of strong demand pressures,” it said.
When contacted, Socio-Economic Research Centre executive director Lee Heng Guie said he expects inflation to be between 2% and 2.5% next year, due to the low base, implementation of the SST and potential rationalisation of the fuel subsidy.
“I expect the OPR to remain unchanged at least through the first half of 2019.
“The central bank is likely to be comfortable at this level, based on the country’s growth forecast of 4.9% for next year,” he said.
UOB senior economist Julia Goh said Bank Negara’s neutral tone on the monetary policy outlook reaffirmed their view that the OPR would be kept unchanged through the first half of 2019.
She noted that themonetary policy statement was largely unchanged, except for the outlook for domestic inflation in 2019.
“On the external front, widely expected US mid-term election results does not change our view for one more 25bps hike in the US Fed funds target rate, followed by three more hikes in 2019,” she said.
Given the ongoing Fed rate hikes and higher US dollar yield, Goh expects the ringgit to face gradual weakness against the US dollar.
“Positive affirmations for the ringgit include more a transparent government, the economy’s underlying strengths, steady economic growth, low unemployment and a surplus current account,” she said.
Source: https://www.thestar.com.my/business/business-news/2018/11/09/opr-stays-at-325/#szEQe1JWUGACOLdq.99