KUALA LUMPUR, Feb 21 — The overnight policy rate (OPR) is expected to be retained at 3.25 per cent by Bank Negara Malaysia (BNM) given the need to balance between capital outflow pressures and growth support, says RAM Ratings.

The research house said although headline inflation is envisaged to accelerate this year, the pace of increase will still be rather nondescript as a trigger point, relative to the downside risks to growth from ongoing fiscal consolidation, volatile capital markets, US-China trade tensions and Brexit uncertainties. 

It added inflation is estimated to be lower at -0.5 per cent in January 2019 (Dec 2018: +0.2 per cent), amid deflationary pressures from the transport fuel component. 

"Looking ahead, headline inflation is projected to accelerate to 2.0 per cent this year, mainly driven by our expectation of continued spillover effects from the reintroduction of the Sales and Service Tax and low-base effects during the three-month window without the Goods and Services Tax (June-August 2018). 

"The impact is envisaged to be particularly pronounced for the food component, and will be the key driver of overall inflation in 2019,” said RAM in a statement today. — Bernama