Julia Goh, a Senior Economist from UOB Malaysia shares some insight regarding Bank Negara Malaysia’s OPR rates.
- BNM kept the Overnight Policy Rate (OPR) unchanged at 1.75% (20th Jan). Bloomberg market consensus was divided with amarginal tilt towards a hold (12 for hold, 11 for cut). This marks the third straight meeting that BNM kept rates on hold. The Statutory Reserve Requirement (SRR) was also kept unchanged at 2.00%. BNM has extended the flexibility for banks to use their holdings of government bonds to meet SRR compliance until end-2022. The next scheduled Monetary Policy Committee (MPC) decision is on 4th Mar 2021.
- BNM said that near-term growth will be affected by the re-introduction of stricter containment measures but the impact will be less severe than that experienced in 2020. BNM expects the growth trajectory to improve from 2Q 2021 onwards. The roll-out of vaccines in the coming months will help lift sentiment. Downside risks to the outlook remain, stemming mainly from uncertainties of the pandemic and potential challenges that might affect the roll-out of vaccines.
- BNM considers the current monetary policy stance to be appropriate and accommodative. However, they added a new line that given uncertainties surrounding the pandemic, future stance will depend on new data and information. In other words, we think BNM is in a “wait-and-see” mode. Given the possibility of further extension of the current containment measures and potential downside risks, we maintain our view for a 25bps OPR cut to 1.50% in 1Q 2021.
