• BNM’s latest statement on Thursday guided that the current monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects, while it remains vigilant to ongoing economic developments.

KUALA LUMPUR (Sept 7): Most economists expect Bank Negara Malaysia (BNM) to maintain the overnight policy rate (OPR) at 3% till the end of 2024, noting that the central bank’s  focus has now shifted to ensuring stable economic growth in the face of external risks such as the resumption of the US Federal Reserve’s interest rate hike and China’s credit contagion effects.

BNM’s latest statement on Thursday guided that the current monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects, while it remains vigilant to ongoing economic developments.

UOB Global Economics & Market Research economists said BNM appears to be comfortable with its monetary stance, after removing the lines of “slightly accommodative” and “limited risks of future imbalances” from its latest announcement compared to its July statement.

“It bolsters the case for a rate pause ahead. Hence, we keep our view that the Monetary Policy Committee will continue to stand pat at the next and final meeting this year, which is scheduled on Nov 1-2, leaving the OPR unchanged at 3%,” they said after BNM announced the decision to maintain the policy rate at 3%, which is in line with all 21 economists’ expectation surveyed by Bloomberg.

This is the second time the OPR has been maintained at 3%, after BNM kept the rate unchanged in July. The central bank had raised the OPR by 25 basis point to 3%, from 2.75%, back in May.

The UOB economists said Budget 2024, which is scheduled to be tabled next month, is expected to unveil some measures to boost the economy and subsidy rationalisation to enhance fiscal sustainability going into 2024.

“With that, we reiterate our call for no rate cuts in 2024, barring any unexpected swing in the global environment,” they added.

MIDF Research concurred with the view that BNM is likely to keep the OPR unchanged. However, the research house said the decision is 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 policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as persistently high inflation and a further rise in household indebtedness,” said MIDF.

HSBC Global Research said it expects a long pause from BNM, keeping the OPR at 3% over its forecast horizon until end-2024.

“That said, what can move the needle is risks to growth,” said HSBC. “While growth has slowed on a year-on-year basis, momentum still remains strong. If growth deteriorates faster than BNM expects, it will likely act quickly. But this is not our central case.”

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