MARC Ratings Bhd expects another Overnight Policy Rate (OPR) hike by another 25 basis points (bps) to 2.75 per cent in Bank Negara Malaysia’s November 2022 Monetary Policy Committee (MPC) meeting.
The rating agency said the Sept 8 hike, the third in as many MPC meetings, further rolls back part of the monetary support implemented during the worst of the Covid-19 crisis.
After the pandemic emerged in early 2020, the MPC had cut the OPR by a cumulative total of 125bps from the pre-pandemic level of 3.00 per cent.
“The MPC’s latest move comes as no surprise given the significant surge in Malaysia’s second quarter (Q2) 2022 gross domestic product (GDP) growth pace to 8.9 per cent (Q1 2022: 5.0 per cent).
“With this, gross domestic product (GDP) growth pace in the first half (1H) 2022 stood at 6.9 per cent, just a hair’s breadth lower than the 7.0 per cent achieved in the same period last year,” it said in a statement.
With domestic demand expected to remain firm on the back of, among other things, an improving labour market, MARC has upgraded its full-year 2022 GDP growth forecast to 6.5 per cent from 5.5 per cent previously.
The upgraded forecast remains in line with the central bank’s forecast range of 5.3–6.3 per cent.
“We expect the demand-pull side of the inflation equation, given the improving domestic growth outlook, to manifest itself stronger going forward.
“On the external front, we see the Ukraine-Russia conflict, which has triggered particularly severe disruptions to global markets for critical raw materials, and worsening drought conditions continuing to contribute towards global inflationary pressures,” it added.
MARC said it had also revised its 2022 inflation forecast upwards to 3.3 per cent from 2.7 per cent previously.
This was slightly above Bank Negara’s forecast range of 2.2–3.2 per cent.
Meanwhile, MARC said it sees the ringgit remaining under pressure in the coming months for reasons that are expected to include aggressive interest rate hikes by a hawkish US Federal Reserve, disappointing economic data from a zero Covid–obsessed China that has dampened oil prices and political rhetoric in Malaysia.
Malaysian Rating Corporation Berhad is a domestic credit rating institution that provides credit ratings and research on issuers of commercial papers, bonds, long-/short-term debts, and preferred shares, as well as asset-backed securities.
