HSBC expects another 25 bps cut in OPR

The headquarters of Bank Negara Malaysia is pictured in Kuala Lumpur on August 12, 2016. Malaysia’s economic growth eased in the second quarter, the central bank said on August 12, attributing the slowdown to a decline in exports amid subdued global demand. / AFP PHOTO / MOHD RASFAN

KUALA LUMPUR: HSBC Global Research expects Bank Negara Malaysia (BNM) to cut another 25 basis points (bps) in the overnight policy rate (OPR) at its meeting on Wednesday.

Its economist, Lim Su Sian, said BNM must continue to respond to the softer economic environment with monetary policy easing. 

However, she said BNM needed to be judicious in its easing, as too aggresive an approach could be vulnerable to capital outflows, which might be more challenging to manage. 

“We think BNM also has a scope to ease a little more given that inflation is currently low. Since June, headline inflation has been below BNM’s 2% to 3% comfort range. 

“It is likely to stay that way for most of the remainder of 2016, as food being a significant component in the consumer price index continues to decline in year-on-year terms in line with our global crude oil price assumptions,” Lim said in a statement on Monday.
 
She also said that although BNM’s monetary policy statement in July was not categorically dovish, the monetary policy committee did not shut the door on further easing, which showed that the balance of risks is still towards the downside.

“Should BNM not deliver this rate cut as we expect, further policy accomodation remains, and a cut at the Nov 23 meeting cannot be ruled out,” Lim added. 

On July 13, BNM made a surprise 25 bps cut in OPR to 3.00%, the first cut since 2009. - Bernama