No urgency for Bank Negara to raise OPR - AmBank

KUALA LUMPUR - There is no urgency for Bank Negara Malaysia (BNM) to revise upwards the Overnight Policy Rate (OPR) going forward as Malaysia’s headline inflation and services inflation continued its downward trend, said AmBank Group.

The bank’s economic division said that with Malaysia’s core inflation being modest so far due to slower hiring activities and the lag effect from the 125 basis points (bps) cumulative rate hikes, there is no urgency for the interest rates to be increased higher from this point forward.

"Services inflation is also on a downward trend, declining to 3.9 per cent year-on-year (y-o-y) (April 2023: 3.6 per cent y-o-y),” it said in a research note today.

AmBanksaid thus, the OPR is likely to stay at 3.00 per cent for the whole of 2023.

However, the Monetary Policy Committee has hinted at the need to ensure that the stance of monetary policy is appropriate to prevent the risk of future financial imbalances.

"This could imply that future interest rate adjustment remains a possibility. However, from our point of view, this depends on how the economy and core inflation indicators will evolve for the months to come,” it added.

Meanwhile, Malaysia’s headline inflation eased in May and continued its downward trend, easing to 2.8 per cent y-o-y in May 2023 (April 2023: 3.3 per cent y-o-y).

"This brings the year-to-date inflation to 3.4 per cent, which is within our full-year forecast of between 3.0 per cent to 3.5 per cent.

"On a month-on-month basis, headline prices increased by 0.2 per cent month on month (year-to-date average: 0.2 per cent),” AmBank added. - BERNAMA