KUALA LUMPUR, 13 April — AmBank Research expects the overnight policy rate (OPR) to remain at 1.75 per cent moving forward.
In a research note today, it said the expectation also implies the three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) would stay at 1.94 per cent, with recent macro indicators showing signs of economic recovery taking place.
“At the start of 2021, the initial perception was that BNM may reduce the OPR by 25 basis points (bps) from 1.75 per cent either in January or March. If that were to happen, the three-month KLIBOR would have edged down to 1.69 per cent.
“As a trading nation, Malaysia’s economy is benefiting from improving global trade and growth. Firm commodity prices are also lending support to growth,” it said.
Besides, the research firm said the ongoing rollout of vaccination programmes in many economies, including Malaysia, together with policy support, helped facilitate an improvement in private demand and labour market conditions.
“Overall business sentiment and consumer confidence have improved. Loan growth has been inching up while the leading indicator is also looking positive. With manufacturing and trade data turning favourable, potential investment and capital expenditure (Capex) are in the cards,” it said.
Although the financial markets have experienced bouts of volatility, AmBank Research said the overall financial conditions remain supportive of economic activities.
It said the positive wealth effect from the domestic equity market supported by retail investors and the still favourable bond market will provide positive impetus to the overall economic performance.
Meanwhile, it said the headline inflation in 2021 is projected to average higher, primarily due to an increase in global oil prices.
AmBank Research said the oil prices are poised to temporarily spike in the second quarter this year (2Q2021) due to the lower base from the low domestic retail fuel prices in the corresponding quarter of 2020, before moderating thereafter.
“It could reach a high of 5.0 per cent in 2Q2021. Nonetheless, the underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments.
“Overall, inflation is expected to be around 3.0-3.5 per cent and probably reach a high of 4.0 per cent for the full year of 2021 from -1.1 per cent in 2020,” it added. — Bernama
