OCBC gave its view on Malaysia Central Bank’s decision to keep the policy rate unchanged at 3.00%, which it said was in line with expectations and that the tone of the official policy statement was also relatively unchanged from the previous meeting on 24 January.
The bank noted that there were some changes made to BNM’s statement vis-à-vis certain parameters among them while Bank Negara maintains that the global growth will be supported by domestic demand and better trade activities, it sees expansion as moderate. Furthermore, it now sees “prospects of monetary easing in some countries in the second half of the year” which was absent in the January policy statement.
OCBC noted on BNM’s assessment of growth and inflation which was broadly unchanged relative to its January meeting. BNM continues to expect better GDP growth in 2024 versus 2023 supported by export growth, tourism, household spending and investments. It maintained that the inflation outlook remained “highly dependent on the implementation of domestic policy on subsidies and price controls…”. Our GDP growth forecast for 2024 is 4.2% versus 3.7% in 2023. Importantly, BNM was categorical that the currency is “currently undervalued” while reiterating that the authorities are taking “coordinated actions to encourage repatriation and conversion of foreign investment income” by government linked companies and government linked investment companies to shore up support for the currency. Indeed, MYR has appreciated versus USD since 1 March, when the Financial Markets Committee (FMC) convened to discuss external developments and step-up support for the currency.
The bank added that BNM will remain a steady pair of hands for the rest of 2024, and in its view expects no changes to the policy rate, at 3%, while BNM remains mindful of external (specifically currency) developments.
