Malaysia: Bank Negara Malaysia stands pat in November
At its final meeting of the year on 3 November, the Monetary Policy Committee of Bank Negara Malaysia (BNM) kept the overnight policy rate (OPR) stable at 1.75%, marking the eighth consecutive hold and matching market expectations.
Well-anchored inflation expectations, against the backdrop of an accelerating recovery, were largely behind the Bank’s decision to hold rates. Despite easing in the third quarter due to Covid-19 restrictions, economic activity is seen gaining traction in the remainder of the year and in 2022 on higher global demand. With regard to prices, inflation is seen remaining within the Bank’s estimated range of 2.0%–3.0% overall this year, while spare capacity in the economy will keep inflationary pressures in check in 2022.
Looking ahead, the Bank’s communiqué did not include any strong leads on future policy moves. Once again, the Bank highlighted that Covid-19 flare-ups and slower-than-anticipated global growth pose key downside risks, and it committed to “utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery”. The vast majority of our panelists pencil in the first hike in H2 2022.
Commenting on the outlook for monetary policy, Julia Goh and Loke Siew Ting, economists at United Overseas Bank, noted:
“Main causes that could trigger BNM to consider earlier rate hikes include a more robust and stable domestic growth in coming months and signs of wider pass-through of higher costs to consumers as the economy recovers. For now, BNM considers the stance of monetary policy to be appropriate and accommodative. Given the nascent recovery, potential risk of virus resurgence, existing spare capacity, subdued property inflation, and ongoing subsidies to cap domestic fuel prices, we continue to expect BNM to stand pat on the OPR until mid-2022. Thereafter, we pencil in a 25bp rate hike to 2.00% in Q3 2022.”
The next monetary policy meeting is scheduled for 20 January 2022.