Notably, the much anticipated monetary policy decision by Bank Negara Malaysia will be announced this week, however, Standard Chartered has come out with its projection anticipating the Central Bank to keep the overnight policy rate (OPR) unchanged at 2.75%.
The regional bank says that with subsidies still in place, January inflation moderating slightly, and only one month of data since the January pause, the central bank is likely to maintain its wait-and-see stance to assess the impact of cumulative past OPR adjustments. It said it will watch for how BNM’s assessment of the domestic growth and inflation outlook has evolved over the past month
While the central bank paused in January, the tone of the accompanying monetary policy statement was not dovish. BNM had a positive assessment of the domestic economy and left the window open to further hikes. SC is maintaining its call for BNM to hike the OPR pre-emptively by 25bps to 3.00% in May, ahead of a potential fuel subsidy rationalisation in H2, which may exclude the top 20% (T20) income group from fuel subsidy.
At the Ministry of Finance’s (MoF’s) USD 80/bbl oil price assumption, the bank estimates that the removal of the fuel subsidy for the T20 income group will add 0.5ppt to inflation annually.
