BNM likely to retain OPR amid global currency volatility

Bank Negara Malaysia (BNM) would likely keep its overnight policy rate (OPR) at 3.0 per cent this year, after taking into accounts a number of factors, including the renewed global currency volatility, said OCBC Bank.

In a statement, the bank said even as it continued to highlight downside risks to growth due to global uncertainties, a recent upturn in some indicators, including exports had enabled the central bank to breathe more easily.

"Overall, combining the fact that BNM appears to be slightly more relaxed about growth prospects and also more watchful of inflation uptick this year, we believe that it is likely to shy away from making tweaks to its OPR rate in the near term.

"Thus, the likelihood of the OPR staying unchanged at 3.0 per cent for the whole of 2017 has risen, unless the global trade growth gets seriously derailed enough for the central bank to consider easing again," OCBC said.

On the inflation front, the bank said even as BNM was keen to emphasise - rightly - that the underlying core inflation would remain stable in 2017, it had nonetheless noted that, due to higher global oil prices, headline inflation was likely to head up compared with 2.1 per cent in 2016.

"Our sense is that a combination of pass-through effect from weaker currency and higher domestic fuel prices, not to mention the inescapable base effect would push inflation to around 2.7 per cent, close to the top end of the two to three per cent expected by the central bank," it added. - BERNAMA