KUALA LUMPUR: Local investment banks expect Bank Negara Malaysia (BNM) to raise the overnight rate (OPR) by at least 25 basis points (bps) by the end of the month. year, following the US Federal Reserve’s 75 bps rate hike on Wednesday.
In a note today, Kenanga Investment Bank Bhd (Kenanga) said it expects BNM to maintain its hawkish tone and raise the OPR by at least 25 basis points in each of its two remaining Monetary Policy Committee (MPC) meetings this year. , scheduled for September 7 and 8 and November 2 and 3.
He said the Fed’s aggressive posture and obsession with controlling inflation indicate that it will continue to raise interest rates sharply, to the detriment of growth.
As for Malaysia, it noted that inflationary pressure was mounting, registering a higher than expected rate of 3.4% in June 2022 against 2.8% in May 2022 due to pent-up demand and tourism-related spending after the reopening of international markets. borders and removal of COVID-19 related restrictions.
“In addition to expecting Gross Domestic Product (GDP) growth to continue to be driven by the stronger recovery in domestic demand, we expect BNM to maintain its hawkish tilt and increase the OPR by at least 25 basis points each in its two remaining MPC meetings for this year,” Kenanga said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) maintains its expectation that the BNM would increase the OPR by another 25 basis points at the September MPC meeting, ending the year with the OPR at 2.5%. against 2.25% currently.
“The reopening of international borders, the transition to endemic status of COVID-19 and the special Employees Provident Fund withdrawal program are expected to support Malaysia’s gross domestic product in the second quarter of 2022,” he said. in a separate note.
Regarding the United States, HLIB expects the Fed to continue raising interest rates in the near future, although he noted that higher interest rates could fuel fears a recession is looming, as industrial production fell slightly in June, while real personal consumption expenditure also contracted. slightly in May. – Bernama