KUALA LUMPUR: Bank Negara Malaysia sounds more upbeat about the country's economic recovery that prompts it to keep its Overnight Policy Rate (OPR) unchanged, United Overseas Bank (Malaysia) Bhd senior economist Julia Goh said.
Bank Malaysia, at its Monetary Policy Committee meeting today, held the OPR at 1.75 per cent following cumulative 125 basis points (bps) cuts over four straight meetings since January this year.
A Bloomberg poll was mixed with a narrow majority that expected a hold (12 expected no change versus nine for a 25bps cut).
"Bank Negara sounded more upbeat with highlights that the global economy continues to improve and Malaysia's economic activity recovering from the trough in April. It expects the improvement to continue into 2021, though the pace of recovery will be uneven across sectors," Goh said in a report today.
"The recovery will continue to be supported by the fiscal stimulus packages, monetary and liquidity measures, as well as the stimulus effect from the cumulative 125bps reduction in OPR between January-July," she added.
Goh pointed that the central bank had felt that the current monetary policy stance was appropriate and accommodative.
As such, she thinks this reflected a shift towards a neutral policy stance that implies no further rate cuts.
"Barring any negative surprises, we expect the OPR to stay at 1.75 per cent at least until the first half of 2021," Goh said.
Bank Negara's next monetary policy decision is due in November, which marks the final meeting this year.
OCBC economist Wellian Wiranto said it had thought on balance that Bank Negara would cut this time round, partly because of the expiration of the loans moratorium by the end of September.
"The (Bank Negara) statement did not provide any hint of specific concern on that front, putting its focus, rather, on how economic activity including labour market and household spending continue to recover."
Wellian said Bank Negara was comforted enough by how well the economy had healed from the Covid-19 pandemic damages, to take the view that households and businesses would not have any big issue servicing their loans once more come October.
"Perhaps, like a good doctor, Bank Negara sees no need in over-prescribing medicine if the patient is already recovering well enough on the existing mix.
"The check-ups will continue routinely from here, however, and if there is any indication that the patient's conditions have turned for the worse, either because of unfavourable internal changes or unhelpful external conditions, this doctor would not hesitate to prescribe something stronger, however," he added.