CGS CIMB says that it maintains its forecast of two 25bp Overnight Policy Rate (OPR) hikes in 2H22F by Bank Negara Malaysia adding that thus far BNM continues to reiterate its cautious stance contrary to the hawkish Fed.
The US Federal Reserve’s hike of the Fed Funds Rate (FFR) by 50bp on 4 May 2022 was a widely expected move. Further policy clarity was given, as the Fed chairman indicated the possibility of another 50bp hike over the next two meetings, scheduled on 15 Jun and 27 Jul 2022.
On top of that, the Fed said it will also utilise another policy tool in managing inflation, by reducing its balance sheet by allowing it to decline by US$47.5bn for the months of June-Aug, and then rise to US$95billion/month starting in Sep.
The stockbroking firm said that Malaysia may have greater control over its monetary policy movements vs. regional peers.
It said that the country is a major beneficiary of high commodity prices, especially with palm oil and natural gas prices on an uptrend, hence the inflow into its current account can offset the outflow on its financial account.
“Plus, it has other measures it can utilise to minimise ringgit volatility, including encouraging government-linked companies (GLCs) to repatriate money from abroad, which it had done post the taper tantrum in 2013, “ it said.
