The 25 basis point increase in the Overnight Policy Rate (OPR) will benefit fixed deposit (FD) savers after the real rate of return on deposits will return to positive in 2018.
KUALA LUMPUR: The 25 basis point increase in the Overnight Policy Rate (OPR) will benefit fixed deposit (FD) savers as the real rate of return on deposits will return to positive in 2018.
According to Maybank Investment Bank Research on Friday, for full year 2017, Malaysia’s headline inflation rate was +3.7% on-year (2016: +2.1%) while core inflation rate was stable at +2.4% on-year (2016: +2.4%).
It said Bank Negara projects the inflation rate to moderate in 2018 (2018E official: +2.5% to +3.5%) on expectations of a smaller effect from global cost factors, although the central bank acknowledges the role of global crude oil prices in influencing the trend in inflation.
As for Maybank Kim Eng’s Economics Team, it is projecting a 2018 headline inflation rate of +2.5% to +3.0%.
“Against average fixed deposit rates of 3%, the real rate of return on deposits remained negative in 2017.
“However, the negative gap has been narrowing and with inflation expected to trend lower still to 2.5%-3.0% in 2018, the gap is projected to turn positive, especially with this 25bp hike in the OPR,” said Maybank Research.
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