kuala lumpur: According to BMI, a subsidiary of Fitch Solutions, Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 3.0% at its meeting on January 22, 2025.
The report said that the still benign inflation and solid growth outlook suggest that BNM can afford to keep OPR at current levels for a long time.
“In line with our expectations, headline inflation was 1.8% year-on-year in November, down slightly from 1.9% in October.
“Furthermore, headline and core inflation both averaged 1.8% in the first 11 months of 2024, well below Malaysia’s 10-year average of 2.0%, with inflation still sufficient for the bank to maintain operating margins. “It shows that they are calm.” Said.
Barring further domestic policy measures or global price shocks, inflation should average 1.8% in 2024 and 2.4% in 2025, the report said.
“We are in agreement on this point, acknowledging that while inflation is ‘expected to remain manageable’ in 2025, the outlook remains dependent on the details of the implementation of domestic policy measures.”
“We believe this is directed towards the removal of the block subsidy for RON95 petrol announced in Budget 2025,” the report said.
At the same time, BMI expected the central bank to maintain OPR at its current level of 3.0% for the rest of the year, given the solid growth outlook.
“Central banks don’t have to worry too much about the economy.
“Since the last update, the central bank’s confidence in the economy has remained intact due to ongoing investment projects that will boost exports and expand the economy’s productive capacity,” it added.
The research firm considered BNM’s confidence level to be in line with recently revised upward growth forecasts for 2024 and 2025 (5.0% and 4.7%, respectively).
“Our forecast is broadly consistent with policymakers’ recent upward revision of their 2024 real gross domestic product (GDP) growth forecast to 4.8% to 5.3% (previously 4.0% to 5.0%). This is close to the upper limit of the government’s real gross domestic product (GDP) growth rate for 2025.The GDP growth rate target is 4.0-5.0%.
“In any case, Malaysia’s robust growth outlook suggests that the bank could keep interest rates on hold to preserve policy space, rather than acting in the event of a negative shock to the economy.” added.
