BNM Expected to Hike Policy Rate in July: Moody’s Analytics

According to Moody’s Analytics, the central bank, Bank Negara Malaysia (BNM) is expected to lift its Overnight Policy Rate (OPR) by 25 basis points (bps) to 2.25 per cent at its fourth Monetary Policy Meeting (MPC) of the year scheduled for this week.

In its report today, the research firm also noted that the country’s central bank hiked the rate in May, lifting it from the record low where it had languished for nearly two years.

“Rising inflation pressures caused by higher global commodity prices and supply-chain disruptions have pushed Malaysia’s central bank to tighten.”

“With domestic conditions firming as the economy reopens, BNM can begin reducing the degree of monetary accommodation.”

“In addition, upbeat momentum in distributive trade sales, dip in unemployment rate to new pandemic low at 3.9 per cent in April 2022 and double-digit expansion rate of external trade provide positive signals of strong recovery in the economy,” Moody’s Analytics said in a report today.

At its third MPC meeting in May, the central bank increased the OPR by 25 basis points to 2.00 per cent. The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.25 per cent and 1.75 per cent, respectively.

It said the sustained reopening of the global economy and the improvement in labour market conditions has continued to support the recovery of economic activity.

The economic research entity holds the view that domestic factors are increasingly at play, particularly, the tight labour market as the unemployment rate is sitting at its lowest level in almost 50 years.

“This is putting an upward pressure on wage growth, particularly in the private sector where firms need to pay more to attract and retain talent.”

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