BMI Research firm predicts that Bank Negara Malaysia will maintain the overnight policy rate (OPR) that determines the cost of borrowing at 3.00% until 2026 before it starts cutting.
In reality, good inflation and robust growth prospects indicate that the Bank can afford to leave the OPR at its current level for an extended period of time.
Further implementation of the subsidy rationalization plan could raise domestic prices and prompt policymakers to begin their easing cycle.
Malaysian policymakers left the OPR on hold at 3 percent for the eighth consecutive meeting in September.
BMI said the forward guidance provided by the latest policy statement is essentially unchanged.
They reaffirmed their belief that Malaysia's resilient growth prospects and benign inflation will give BNM room to maintain rates where they are.
Additionally, the narrowing interest rate differential between the US and Malaysia will continue to act as a catalyst for the Malaysian ringgit to become the best performing emerging market currency in the region.
BNM's confidence in the economy remains intact citing that exports are expected to continue to increase due to the global technology cycle.
Exports emerged as one of the main drivers of growth in the second quarter of 2024 prompting them to increase their 2024 real gross domestic product (GDP) growth forecast to 4.7% from 4.4%. – Business Times
