KUALA LUMPUR, July 12 — MIDF Amanah Investment Bank Bhd believes the stabilisation of core inflation and the challenging external environment may influence Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at the current rate of 3.00 per cent throughout 2024.
However, it said the decision would be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.
"From a medium-term perspective, the post-pandemic policy rate normalisation provides room for BNM to better manage risks that could destabilise the future economic outlook, such as persistently high inflation and a further rise in household indebtedness," it said in a research note.
On the ringgit, due to the persistent inflation environment in the United States (US), MIDF foresees elevated demand for the US dollar, at least until there is a clearer outlook on its interest rate direction.
"We remain cautious of downside risks that might hinder the ringgit's rally in 2024, such as delays in the US Federal Reserve's interest rate easing and further geopolitical tensions between China and the US, as well as in the Middle East," MIDF said.
Meanwhile, RHB Investment Bank Bhd maintains its view that the OPR will remain unchanged at 3.00 per cent for 2024.
Policymakers might hold the OPR rate while assessing the lagged impact of fiscal policy changes on the overall inflationary trajectory and economic momentum.
"In our view, three key factors will drive the OPR behaviour, namely Malaysia's economic momentum, whereby we are expecting growth to expand by 4.6 per cent in 2024 (against 2023's 3.7 per cent).
"Secondly, the inflation trajectory, which we think headline Consumer Price Index will expand by 2.6 per cent in 2024 (from 2023's 2.5 per cent), and thirdly, to a smaller extent, on how global rates may behave in the foreseeable future," it said in its research note.
On the ringgit, it expects the ringgit-US dollar pair to consolidate towards 4.65 by end-2024 following the anticipated Federal Funds Rates reduction by December and improvement in the macroeconomic backdrop.
For CIMB Investment Bank Bhd, BNM's Monetary Policy Committee decision yesterday to keep the OPR at 3.00 per cent was unsurprising.
The monetary policy stance remained neutral as the economic recovery gained momentum, and the inflation outlook remained anchored within the official target with manageable pass-through effects from the diesel subsidy rationalisation.
"As such, we expect BNM to keep the OPR at the current level until year-end," it said.
— Bernama
