CIMB Research expects OPR to stay at 3.0%

KUALA LUMPUR: Bank Negara Malaysia (BNM) is expected to extend its rate pause pending finer details on fuel subsidy rationalisation plans, keeping the overnight policy rate (OPR) at 3.0 per cent at the upcoming monetary policy meeting on May 9, said CIMB Treasury and Markets Research.

It also expects monetary policy to remain at the status quo and maintain its end-2024 OPR forecast of 3.00 per cent.

"We expect BNM to affirm a data-dependent stance tomorrow pending finer details on subsidy rationalisation amid benign inflation passthrough from increases in electricity and water tariffs, as well as the service tax hike in the first quarter of 2024,” it said in a research note.

CIMB Treasury and Markets Research noted that the withdrawals from soon-to-be introduced Employees Provident Fund (EPF) Account 3 and civil servants’ salary hikes are poised to boost private consumption.

On gross domestic product (GDP), the research house reiterated its 2024’s growth forecast of 4.9 per cent, supported by the spillover of civil servants’ salary hikes.

It added the projected RM25 billion outflows from EPF Account 3 in the first year might contribute 0.5 percentage points to GDP growth, while the civil servants’ salary hike might add 0.2 percentage points.

"The spillover to consumption is likely greater as Prime Minister Datuk Seri Anwar Ibrahim guides prioritisation on salary increment -- to the tune of 25-30 per cent -- for those in lower grades or low-income group, who are likely to spend a higher portion of additional income earned,” it said.

CIMB Treasury and Markets Research added that the B40 and M40 groups held 1.0 per cent and 17 per cent of total EPF savings at RM11 billion and RM180 billion, respectively, compared to the T20’s 82 per cent share or RM897 billion. - Bernama