The Week Ahead

All eyes on OPR

BANK Negara’s third Monetary Policy Committee meeting will take place tomorrow, with economists expecting the central bank to maintain the overnight policy rate (OPR) at 2.75%.

RHB Investment Bank expects the central bank to hold the OPR at 2.75% at the meeting.

The research house maintained its peak OPR forecast of 3.25% with the balance of risks tilted towards a print of 3% and the Bloomberg consensus peak OPR estimate being 3%.

RHB also expects first quarter gross domestic product (GDP) to print 4.2% year-on-year (y-o-y).

According to a Bloomberg poll, two economists expect no change to the OPR at 2.75%.UOB Global Economics and Markets Research continues to see room for further normalisation of monetary policy, on the back of sticky core inflationary pressures, still positive domestic growth momentum and domestic financial stability.

It kept its view for a final interest rate hike of 25 basis points (bps) at this meeting, which will take the OPR back to the pre-pandemic level of 3%.

Thereafter, Bank Negara will leave the OPR unchanged for the rest of the year in view of a softer inflation outlook globally in the second half of 2023, an expected end to the global rate hike cycle by mid-2023 and rising recession risks in advanced economies.

Singapore retail sales

RETAIL sales could contract once more, down by 6% y-o-y given still elevated inflation and slowing growth momentum, according to ING.

ING said Singapore recently reported disappointing first-quarter GDP numbers and retail sales likely reflected the downturn in growth.

Indonesia GDP

INDONESIA’s first quarter GDP is forecast to grow 4.4% y-o-y driven by solid household consumption and topped off by a relatively strong export performance, according to ING.

It added that the purchasing managers’ index remained in expansion mode for the first few months while retail sales managed to stabilise after a brief contraction in January with inflation easing.

According to the median forecast in a Reuters poll, GDP is expected to grow 4.95% in the first quarter.

The International Monetary Fund’s latest forecast put Indonesia’s GDP growth on a 5% path in 2023, according to the fund’s World Economic Outlook report in April, a 0.2 percentage point higher than the fund’s January report.

US Federal Reserve

ACCORDING to a Bloomberg survey, 79 out of 88 economists polled expect the US Federal Reserve (Fed) to hike interest rates by 25 bps to the Fed funds target rate range of 5% to 5.25%.

However, there are eight economists who expect a pause while one analyst is looking for a bigger 50 bps hike.