KUALA LUMPUR: With the Overnight Policy Rate (OPR) unchanged at 3.25 per cent, announced on Thursday, Bank Negara Malaysia remains cautious with its risk assessment that is 'tilted to the downside' for the year.
The central bank, in its assessment, had listed potential escalation of trade tensions and commodity-related shocks as primary risks on Malaysia’s economy.
Kenanga Investment Bank Bhd in its notes said with Bank Negara saying that global growth momentum is moderating with slower growth in the major economies, the central bank is now slightly pessimistic.
Bank Negara had in its first monetary policy meeting this year, maintained OPR at 3.25 per cent. It also kept the statutory reserve requirement at 3.50 per cent.
Both figures was in line with Kenanga’s and market’s expectations. Bank Negara’s next monetary policy meeting will take place on the 4th and 5th of March.
Kenanga noted trade tensions is a downside risk on our economy and Bank Negara had also acknowledged 'trade tensions are beginning to have a material impact on global trade and investments'.
The research house also highlighted that BNM's 'tightening financial conditions and heightened volatility in financial markets, coupled with elevated debt levels' may hamper Malaysia’s economic growth projections.
Malaysia’s economic growth rate had slowed for four straight quarters with the July-to-September growth at 4.4 per cent. The release of the final quarter of 2018’s gross domestic product data is scheduled on February 14, 2019.
Inflation is expected to average moderately higher in 2019 from 1 per cent in 2018, Bank Negara had said. Headline inflation will be dependent on global oil prices and should remain subdued in the absence of strong demand pressures.
Kenanga said while it remains to be judged whether external slowdown will weigh on domestic activity, the US Fed’s dovish approach to rate hikes provides Bank Negara ample room to maintain its accommodative monetary policy stance, in line with the research house' expectation of an unchanged OPR for 2019.