Standard Chartered is of the view that Bank Negara Malaysia will announce its monetary policy decision with the overnight policy rate (OPR) hike to 3.00%, reversing the COVID- induced rate cuts.
The bank said it will watch for BNM’s assessment of its monetary policy stance, which may shed light on how close the central bank is to the end of the tightening cycle.
Growth remains strong in Malaysia, with full-year 2022 GDP growth expected to come in at 8.8%. Inflation is elevated and broad-based, reflecting robust demand inflation amid rising manufacturing and services wages, although services wages are still running below medium-term trend growth. Upside inflation risks remain, with broad- based inflationary pressure, rising services costs and still-high import prices.
Following a likely January hike, SC expects a pause in March, before another 25bps hike in May, assuming the government announces some form of subsidy adjustments for H2-2023. If subsidies are removed for only 20% of RON95 users, the bank also estimate headline inflation will increase by only 0.9% on an annual basis.
