A survey found that Bank Negara Malaysia (BNM) is expected to raise interest rates by 25 basis points at its latest monetary policy meeting on Wednesday (July 6, 2022), the next consecutive increase in more than a decade.
Such measures may be taken to curb inflation caused by the depreciation of the ringgit (RM) as the US Federal Reserve (Fed) raises rates.
Citing sources from 22 economists conducting the survey, they forecast BNM to raise the overnight policy rate (OPR) by 25 basis points, the last time it was done twice in a row in mid-2010.
It is worth noting that BNM had previously made a surprise move to raise the OPR by 25 basis points to 2% during its meeting last May.
Nonetheless, BNM's statement explained that it was taking ‘measurable and gradual’ measures and at a slower pace than other global partners.
Turning to the survey, 12 out of 22 economists also forecast another 25 basis points increase in September to 2.50% while the rest felt no change after the July rise.
Morgan Stanley's Asian economist Derrick Kam said there are many factors that BNM will take into account before implementing the OPR increase.
Among the factors outlined were the increase in the minimum wage, the adjustment of ceiling prices for food products and the string demand from the reopening of the economy.
Moody's economist Denise Cheok added that the implementation of the OPR hike would help support the currency by maintaining interest rate differentials following the fall of the RM against the dollar.
Meanwhile, the survey also found that a 25 basis point increase is forecast to continue in each quarter until 2023 and the OPR is expected to reach a pre-pandemic level of 3% in the 2nd quarter of next year.
