KUALA LUMPUR, Nov 8 — Malaysia’s interest rate risk will likely remain slightly on the downside as the economic growth is expected to slow to 4.6 per cent in 2019 while inflationary pressure stays subdued even following the reintroduction of the Sales and Services Tax in September.
RHB Research Institute Economist Vincent Loo Yeong Hong said the floating of fuel prices was expected to push headline inflation to 2.5 per cent in 2019 from an estimated 1.2 per cent this year.
“This still puts the average real interest rate comfortably within positive territory, rendering it unlikely that Bank Negara Malaysia (BNM) will hike rates.
“We are of the view that the central bank will maintain the overnight policy rate (OPR) at 3.25 per cent for 2019 as this will help keep stability of the ringgit versus the US dollar against the backdrop of ongoing monetary tightening by the US Federal Reserve (Fed),” he said in a note today.
Earlier, BNM announced that it has kept the OPR unchanged at 3.25 per cent for the fifth consecutive Monetary Policy Committee meeting since raising 25 basis points back in January this year.
The central bank expects the Malaysian economy to remain on a steady growth path for 2019 and the remainder of 2018.
On the external front, Loo said the global growth has started to slow while a protracted trade war between the US and China was likely to have an adverse impact on global trade going forward.
“Under such circumstances, the Fed might be forced to slow down its pace of rate hikes next year,” he added. — Bernama
