UOB: BNM Likely To Increase OPR By Another 25bps In September
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UOB Global Economics & Markets Research has said that Bank Negara Malaysia (BNM) will likely increase the overnight policy rate (OPR) by another 25 basis points (bps) in its upcoming Monetary Policy Committee (MPC) meeting on 8 September. This will bring the current OPR of 2.25% to 2.50%.

According to UOB, an increase in the OPR is expected given the robust growth of Malaysia’s economy in the second quarter of 2022 (2Q22). This is reflected in the data provided by the Department of Statistics Malaysia (DOSM), which indicated a gross domestic product (GDP) growth rate of 8.9% in the second quarter of this year – up from the 5% recorded in the previous quarter. 

Aside from the good quarterly GDP growth, the research house also said that an OPR hike is in sight based on signs of further economic growth in the second half of this year (2H22). This is despite the likelihood of a more moderate round of economic expansion during that period. 

(Image: Malay Mail)

UOB further added that the rising inflation in the country will also spur BNM to hike the OPR. Malaysia’s inflation – as measured by its consumer price index (CPI) – rose to 4.4% in July 2022, up from 3.4% in the previous month. An increase in the OPR is expected to help moderate inflation.

In addition to internal factors, UOB highlighted that BNM will also take into account various external factors in deciding on the OPR hike. These include the possibility of aggressive rate hikes by the US Federal Reserve in the future, as well as other global monetary conditions. 

BNM has already raised the OPR twice thus far this year: 25bps in May, and another 25bps in July. While most economists and analysts believe that the central bank will continue to increase the OPR to bring it back up to the pre-pandemic level, the central bank has also reassured the public that any increases will be made in a gradual and measured manner so as not to disrupt the country’s economic growth. 

(Source: The Edge Markets

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