KUALA LUMPUR: The overnight policy rate (OPR) is expected to remain unchanged at three per cent throughout 2024 due to manageable inflation pressures and stable economic prospects, said RHB Investment Bank Bhd (RHB IB).
The investment bank noted that there is a lack of impetus for Bank Negara Malaysia to adjust the OPR given current conditions.
RHB IB said the wide official inflation range of two per cent to 3.5 per cent provides ample room to accommodate future price fluctuations.
"In our view, three key factors that will influence the OPR movements are Malaysia's economic momentum, inflation trajectory, and global interest rate trends in the foreseeable future," it said in a research note.
The bank also revised its 2024 headline inflation projection down to 2.1 per cent from 2.6 per cent previously.
It said inflationary pressure remains manageable following the implementation of the diesel price float in Peninsular Malaysia and the services tax revision, with headline inflation rising by 1.8 per cent year-on-year (y-o-y) in the first seven months.
"We expect headline inflation to remain stable at two per cent to 2.3 per cent y-o-y for the remainder of the year, assuming a delay in RON95 fuel price adjustments.
"The inflation trajectory going forward would hinge on the timeline of RON95 subsidy rationalisation and its quantum of price adjustment, potential demand increases from partial pension fund withdrawals, and the spill-over impact from higher global commodity and food prices," it added.
Meanwhile, AmBank Group opined that the OPR could stay at three per cent for quite some time, possibly into the first half of 2025.
"We do not foresee any movement in the second half of 2024, as Malaysia's inflation rate has remained below two per cent thus far, coupled with a flattish unemployment rate.
"We believe the current three per cent level is appropriate and sufficiently accommodative to support the domestic economy," it said. - Bernama
