KUALA LUMPUR (Oct 31): Bank Negara Malaysia is unlikely to make any changes on its Overnight Policy Rate (OPR) during the upcoming Nov 5 Monetary Policy Committee (MPC) meeting, following a reduction in the US interest rate last night.
The US Federal Reserve slashed its benchmark interest rates for the third time this year by 25 basis points to between 1.5% and 1.75%, which fell in line with expectations.
It is the third rate cut after July and September, nearly reversing the four rate hikes in 2018.
Research houses said although the Fed has signalled no further cuts, they opined the central bank would adopt a wait-and-see approach before timing its next rate cut.
AmBank Research said it has been looking for signs whether the Fed might start to signal that the policy accommodation, which had come following nine rate hikes since December 2015, would be winding down.
But the new language suggests an increased level of data dependence rather than an ongoing intent to adjust rates lower, it said.
"Hence, we now place a low 30% chance of a rate cut in December from previously 60% with room to changes based on potential incoming data.
"On the local front, we reiterate our 60% chance of a no rate cut by BNM during the Nov 5 MPC meeting, " it said in a note today.
Meanwhile, Kenanga Research expressed concern on Malaysia's growth outlook going forward.
Although there seems to be some positive signal that the US-China trade deal would be concluded soon, the impact of higher tariff would still weigh on global trade and growth going forward, it said.
The research firm said it is still hard to foresee any signs that would trigger a speedy and sustainable turnaround in global growth any time soon, which would mean that Malaysia´s growth drivers, manufacturing and exports, would continue to be weak for at least another six to 12 months.
However, the recent Federal Budget for 2020 showed that the government remained committed to spending, albeit more wisely in spite of budget constraints, to stimulate the economy.
"This would help support the economy and lessen the need to depend on the monetary policy.
"As this lowers the probability that BNM would cut the OPR, we expect the central bank to hold the key interest at 3% at its sixth and last MPC meeting for the year, " it explained.
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