KUALA LUMPUR, Nov 3 — MIDF Research expects Bank Negara Malaysia (BNM) to consider normalising its benchmark interest rate next year, despite keeping the overnight policy rate (OPR) unchanged at 1.75 per cent throughout this year.

At this point, the policy normalisation will likely be carried out in the latter half of 2022, it said in a research note today.

"We believe the current focus of BNM’s monetary policy setting is to ensure a sustainable recovery of Malaysia’s economy, coming out from the full lockdown. With the rate of inflation hovering within BNM’s forecast, there is less pressure for BNM to quickly shift towards policy tightening,” it said.

However, MIDF said the decision will be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.

"From a medium-term perspective, the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as the persistently high inflation and a further rise in household indebtedness,” it said.

At the Monetary Policy Meeting today, the central bank decided to keep the OPR unchanged at 1.75 per cent, in line with MIDF and market’s expectations, as the current rate is deemed to be appropriate and supportive of Malaysia’s economic growth. — Bernama