RHB Research expects BNM to maintain OPR until 2016

RHB Research in a research note today said the central bank decided to keep the OPR unchanged during the monetary policy meeting on Sept 11 as BNM views that the latest indicators suggest continued expansion of the economy for the third quarter this year despite ongoing adjustments to external and domestic developments.

The research house said the central bank, however, highlighted that downside risks to growth have increased arising from the moderating growth momentum in the major emerging market economies, uncertainty in commodity prices and the heightened volatility in financial markets.

"As inflation is expected to be contained in 2015 and 2016 while the ringgit continues to trade at a weak level, the central bank will likely put rates on hold for some time to come," it said.

RHB Research also expected broad money (M3) growth to sustain at between four and five percent next year, matching the estimated pace this year, on the back of a sustained growth in economic activities.

It said loan growth, however, is expected to slow down to between six and seven percent next year, from an estimate of 7.5 per cent to 8.5 percent this year, constrained by more stringent rules on lending to households and curbs on the property market.

Meanwhile, RHB Research said the ringgit, which weakened by more than 20 percent compared to a year ago, would likely push up prices of imported goods while lingering weak energy prices will continue to suppress the inflation rate as it is about half the pace it registered over the same corresponding period last year.

It said slower consumption spending following the Goods and Services Tax (GST) implementation, tightening of the property sector and elevated household debt at 85 percent of gross domestic product (GDP) would likely result in a more subdued impact on inflation going forward.