Bank Negara Malaysia (BNM) is expected to maintain the Overnight Policy Rate (OPR), 1.75% during the quarter to support the ongoing economic recovery.
Despite this, some economists expect the Malaysian central bank to tighten policy by the next quarter to curb rising inflationary pressures.
They noted that BNM was enjoying the freedom to keep rates low as price pressures remained weak, however supply chain disruptions and Ukraine’s war would pose greater risks.
According to DBS economist Chua Han Teng, BNM is expected to implement its policy in the early second half of 2022 (2H22) despite the signal of the prospect of a withdrawal of monetary support.
He added that for now, the central bank would like to see the economy recover from the pandemic phase that struck during the growing downside risk.
Meanwhile, a handful of economists predicted a rate hike would occur as early as this month based on widening interest rate differences from regional players and the United States Federal Reserve (Fed).
According to UOB senior economist Julia Goh, the expectation of improvement in the economy and rising price pressures could prompt BNM to implement an OPR rate hike as early as May at 25 basis points.
Moreover with BNM already warning that keeping the OPR low for a long period of time could lead to financial imbalances.
Currently, BNM expects the Malaysian economy to grow by 5.3%-6.3%, slightly lower than the previous projection of 5.5%-6.5%despite strong global demand and strengthening commodity prices.
Meanwhile inflation is estimated to average between 2.2%-3.2%in 2022, slightly above the central bank’s target range of 2%-3%.
