BNM is expected to adopt gradual and measured policy rate hikes, with 25 bps hikes in September and
November MPC meetings to realign with regional and global policy rate trends.
Backed by the BNM’s increasingly hawkish tone and supported by solid growth momentum brought by the better-than-expected 2Q22 GDP growth, Kenanga continues to expect the central bank to raise the overnight policy rate (OPR) by 25 bps at each of its two remaining meetings this year, bringing it to 2.75% by the end of the year.
Hence, Kenanga expects this monetary tightening cycle to gradually tame inflationary pressures, which are projected to accelerate to 4.9% in 3Q22 (2Q22: 2.8%). It is expected to be largely driven by the tight labour market as reflected in the latest unemployment rate (2Q22: 3.9%; 1Q21: 4.1%) and the rising cost of living.
