As Malaysia inflation rate is expected to average above the 4.0% level in 2H22 due to rising food prices amid swelling
import costs, Bank Negara Malaysia is likely to maintain its hawkish stance by increasing the overnight policy rate (OPR) for the third consecutive time in September.
To add, in an effort to realign with other central banks’ hawkish stance, Kenanga reckons that the BNM may continue to tighten post-September meeting, with the OPR reaching 3.00% by 1Q23.
Kenanga also expects the USDMYR year-end forecast to be 4.35; 2021: 4.17): the ringgit may continue to trade above the 4.40 level in the near term as safe-haven demand is expected to remain strong amid heightened global recession fears, Fed’s continued hawkishness, potential escalation of US-China tension and Europe’s looming energy crisis. However, the local note may start to gain ground against the greenback in 4Q22 due to the expectation of strong foreign investment flows into Malaysia amid an improvement in risk appetite for emerging market assets
