KUALA LUMPUR, Jan 26 — Bank Negara Malaysia (BNM) could raise the overnight policy rate by another 25 basis points this year, BMI Research projected after the central bank increased the key rate for the first time in over three years yesterday.
In a research note to day, BMI cited the central bank's explanation for the increase, in which it said its Monetary Policy Committee “recognises the need to pre-empt” the risks that may accrue from keeping the rate too low for too long.
“In line with our expectations, BNM hiked its Overnight Policy Rate (OPR) to 3.25 per cent during its monetary policy meeting on January 25.
“We now expect the central bank to hike interest rates once more by 25bps in 2018, which will take the OPR to 3.50 per cent,” the Fitch Group unit said in its note.
However, it conceded that BNM may avoid taking the step in order to avoid upsetting Malaysia's continued economic growth.
The country is expected to record a full-year gross domestic product (GDP) growth of up to 5.8 per cent for 2017, which is expected to moderate to around 5.4 per cent this year.
“The risks to our view are to the downside as a sharper than expected slowdown in China or a significant increase in global trade protectionist sentiment could weigh on Malaysia's growth outlook, prompting the central bank to remain on hold instead,” the research firm said.
BNM announced a 25 basis point increase to the overnight policy rate yesterday, raising it to 3.25 per cent.
The last increase was in 2014, also by the same amount.
