The Week Ahead - All eyes on Bank Negara

  • Economy
  • Monday, 06 Jul 2020

IT’S going to be a packed data week, but the focus will be on Bank Negara’s monetary policy decision.

All eyes on Bank Negara’s MPC meeting

IT’S going to be a packed data week, but the focus will be on Bank Negara’s monetary policy decision.

Bank Negara’s Monetary Policy Committee (MPC) is scheduled to meet for a fourth time this year tomorrow to review the overnight policy rate (OPR).

The central bank has cut the overnight rate by a total 100 basis point (bps) so far to 2.00% – also an all-time low.

According to ING Asia, the consensus for next week is split between “more cuts” and “on-hold” outcomes, and there is a further split within the rate-cut camp on a 25 basis points (bps) or a 50bps cut.

ING Asia believes a 50bps cut is on the table this week.

Bank Negara will cut its OPR by at least 25bps to 1.75%, according to seven out of the 12 economists polled by Reuters, with two of them betting on a bigger 50bps rate reduction.

The remaining five economists expected interest rates to stay at 2.00%, already a record low, after three consecutive rate reductions in as many meetings this year, Reuters said.

Bank Negara will also be releasing its international reserves as at end-June tomorrow.

On Friday, the Statistics Department is expected to release the latest industrial production index and manufacturing sales.

Australia’s central bank rate decision

AUSTRALIA’S central, Reserve Bank of Australia (RBA) is expected to maintain its rates at the upcoming monetary policy meeting.ING Asia forecasts the RBA leaving rates on hold. It said there was a unanimous consensus behind this view, especially as the policy rate is currently sitting at an all-time low of 0.25% from where it has no room to fall further.

The RBA’s governor Philip Lowe has recently ruled out negative rates and ING thinks he will stick to that. His deputy, Guy Debelle, suggests they are ready to do more quantitative easing if circumstances warrant.

The RBA has maintained the official cash rate (OCR) at 0.25% and the three-year Australian Government securities (AGS) yield target of 0.25% in June.

UOB Global Economics and Markets Research does not see further reductions in the OCR. It is likely the RBA will keep it on hold for an extended period.

It said the focus would remain firmly on end-user rates via the yield curve target, as well as ensuring sufficient liquidity in bond markets and the free flow of credit to households and business.

According to the Bloomberg poll, all 27 analysts expect no change to the OCR as well as of July 3.

Singapore GE2020

THE key data coming from Singapore is just the June official reserves tomorrow.

The republic is holding its 13th General Election 2020 on Friday.

According to UOB, Singapore will release its advance second quarter 2020 gross domestic product data, most likely on the following week after the elections.

The advance data was initially scheduled for tomorrow.

Key data from US on services and non-manufacturing

THE focus in the United States this week will be on the services and non-manufacturing PMIs via IHS Markit and ISM respectively.

Initial jobless claims will also be announced this week.

The IHS Markit US services and composite PMI data alongside ISM non-manufacturing numbers will give a further indication as to the health of the private sector.

According to the Bloomberg survey, the ISM non-manufacturing survey may improve to 50 from 45.4 in May.

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