Economists do not foresee another rate hike this year

PETALING JAYA: Economists do not foresee further hikes to Bank Negara Malaysia’s (BNM) overnight policy rate (OPR) this year, following the 25 basis point increase by the central bank’s Monetary Policy Committee on Thursday.
This is the first rate hike implemented by the central bank since July 10, 2014. The last action was to reduce the OPR from 3.25% to 3.0% on July 13, 2016.
Nomura Holdings Inc’s senior economist, Euben Paracuelles said that this is a “one-and-done hike” and the central bank is expected to hold through the rest of 2018 and potentially into 2019, unless the economy outperforms.
“In the past, rate hikes that were driven by the need to normalise interest rates to avoid causing a build-up of financial imbalances have tended to be very gradual,” he said.
United Overseas Bank (Malaysia) Bhd's (UOB Bank) Senior Economist, Julia Goh said that the research house maintains its stance on the year concluding with the current rate, as there are no expectations for further hikes this year.
Feedback from the ground, she said, suggested that corporates and locals are looking towards a status quo to the current rate.

"BNM reaffirms that domestic financial markets have been resilient. The ringgit has strengthened to better reflect the economic fundamentals. Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. Growth of financing to the private sector has been sustained and is supportive of economic activity,” said Goh.
Meanwhile PublicInvest has maintained its year-end OPR forecast of 3.25% for the sector, though not fully discounting the possibility of a further 25 basis points (bps) hike in the second half of the year.