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RAM expects Bank Negara to maintain OPR

KUALA LUMPUR: RAM expects Bank Negara Malaysia to hold the Overnight Policy Rate (OPR) at 1.75% at its next policy meeting on Thursday.

In a statement issued on Tuesday, it said strong export demand, the ongoing national vaccination programme and various supportive fiscal as well as monetary policies should keep up the pace of economic recovery for now.

“The present level of interest rates should be sufficient to sustain the current recovery momentum, ” it said.

RAM said recent data point towards a stronger-than-expected recovery for exports.

It also pointed out the overall industrial production index rose 1.5% in February (2018-2019 average: +2.8%), underpinned by the manufacturing sector.

“While Malaysia’s domestic conditions are still tepid, the global revival has been spurring demand for our manufactured goods.

“This has in turn propped up Malaysia’s manufacturing output. Exports surged 31.0% in March (February: +17.6%), lifted by the manufacturing segment (March: +35.8%; February: +20.9%), ” RAM said.

In a statement earlier on Tuesday, the Asean+3 Macroeconomic Research Office (AMRO) pointed out the weak inflationary environment had provided Bank Negara ample room to ease monetary policy to stabilise financial markets and support the economy during the Covid-19 crisis.

The OPR was lowered by a total of 125 basis points in the first seven months of 2020 to a record low of 1.75%, where it has remained since.

In its just published annual consultation report on Malaysia, AMRO said the monetary policy should be on an easing bias as uncertainty continues to cloud the growth outlook.

Despite the recent weakening in the recovery momentum, the current low policy rate remains accommodative and should be given more time to be transmitted fully to the real economy, AMRO said.

Reference