KUALA LUMPUR, Jan 20 — Malaysian Rating Corporation Bhd (MARC) expects keeping the Overnight Policy Rate (OPR) unchanged at 1.75 per cent will lend some support to the ringgit.
In a statement today, the credit rating agency said this is because the relatively high yields will continue to attract foreign portfolio interest into the Malaysian bond market.
Bank Negara Malaysia (BNM) left the interest benchmark unchanged at 1.75 per cent during its first Monetary Policy Committee (MPC) meeting of 2021 today.
At the closing bell today, the ringgit ended firmer against the US dollar at 4.0430 from yesterday’s close of 4.0480.
MARC described the central bank’s move as “a prudent pause”, as the resurgence of Covid-19 cases has triggered another round of the movement control order.
“We believe that BNM’s move to hold the present rate is justified,” it said.
According to MARC, BNM has been clear on the limitations of monetary policy to support economic growth, as a lower interest rate would impact banks’ net interest margin, causing banks to become extra cautious in their lending activities.
The rating agency did not rule out the possibility that BNM would introduce other measures to help support the economy if downside risks emerged due to rising Covid-19 cases.
On BNM’s decision to extend the flexibility for banking institutions to use Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) to meet the Statutory Reserve Requirement compliance until December 31, 2022, MARC said that MGS/MGII yields would remain supportive and trending at record lows until the path towards a stronger recovery is clearer. — Bernama
