BNM keeps OPR at 3%, hints at rate hike

BNM keeps OPR at 3%, hints at rate hike”

KUALA LUMPUR, Nov 9 ― The ringgit was upbeat today, ending higher against the United States dollar, buoyed by the fact that Bank Negara Malaysia (BNM) left key interest rates unchanged on Thursday. BNM has kept interest rates unchanged since July 2016 when it unexpectedly cut the interest rate by 25 basis points.

The BNM, consequent to the positive assessment of growth and inflation, has implied that it is expected to review the current degree of monetary accommodation.

RHB Research Institute said, in a note, that Malaysia would experience an upside monetary policy stance in 2018, while BNM projected the Malaysian economy to remain strong in 2018. The central bank expects inflation to moderate next year but is likely to be sensitive to oil prices.

"We assess the policy statement to be unambiguously hawkish", said Sanjay Mathur, an economist at Australia & New Zealand Banking Group.

Economic growth in 2017 is expected to come in at 5.2%-5.7% against last year's 4.2% rise, according to the government's annual economic report.

Domestic demand continues to be a key source of growth in 2018, it said, aided by sustained investments in infrastructure projects and higher capital investment in the manufacturing and services sectors.

BNM said economic growth would be driven by private consumption, supported by continued improvements in income and overall labour market conditions.

For 2017, headline inflation is forecast to be at the upper end of the forecast range. Nevertheless, the trend of headline inflation will be dependent on future global oil prices which remain highly uncertain. "Growth momentum has been lifted by stronger spillovers from the external sector to the domestic economy as firms invest in productive capacity, raise wages and hire more workers", it said.

The ringgit currency has strengthened 6.2 percent against the dollar so far this year, which the central bank said better reflects economic fundamentals.

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