BMI expects OPR to stay at 3% throughout 2024

• "We continue to expect BNM to keep the OPR on hold in the next meeting on Jan 24, and through the end of 2024," BMI said in a statement.

KUALA LUMPUR (Nov 17): BMI, a Fitch Solutions company, expects Bank Negara Malaysia (BNM) to hold its overnight policy rate (OPR) at 3% through the end of 2024.

It noted that the central bank had on Nov 2, for the third consecutive meeting, left the OPR unchanged, which was in line with expectations.

"We continue to expect BNM to keep the OPR on hold in the next meeting on Jan 24, and through the end of 2024," BMI said in a statement on Friday.

It observed that the country's domestic inflation had been on a clear downward trajectory, and expects inflation to ease over the coming months to touch 1.8% by the end of 2023.

"The central bank remains primarily concerned about price stability, and noted upside risks to its view for headline inflation to ease in 2024.

"While BNM expects inflation to remain modest in 2024, it did note upside risks to this view, as the government contemplates revising subsidies and price controls next year,’’ BMI said.

While core inflation remained above its five-year average of 1.6%, BMI said it had continued to ease significantly from a peak of 4.2% year-on-year in November 2022 to 2.5% in September, and is on track to meet BNM's core and headline inflation targets to average between 2.8% and 3.8% this year.

"As we expect growth to pick up in the second half of 2023, our prevailing forecasts for Malaysia’s real gross domestic product growth of 4% in 2023 and 4.4% in 2024 sit at the lower end of BNM's 4%-5% targets, and below the pre-pandemic average (2015-2019) of 4.9%,” BMI noted.

On the ringgit, it opined that the central bank will not want to loosen monetary policy, as this might risk destabilising the local currency and exerting further downside pressure on the note.

"The ringgit has come under significant pressure, having depreciated by 6.5% against the US dollar year-to-date.

“This did not go unnoticed by BNM, which noted in its monetary policy meeting minutes that expectations of a higher-for-longer interest rate environment in the US had led to renewed dollar strength," BMI added.

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