KUALA LUMPUR: Analysts expect Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) steady at 3.00 per cent through 2025.
Hong Leong Investment Bank Bhd (HLIB Research) said its view is supported by Bank Negara Malaysia's assertion that the current monetary policy supports the economy and aligns with the prevailing outlook on inflation and growth, and its commitment to vigilance with a potential second round of inflationary pressures from upcoming domestic policies.
The policies include the phasing out of broad support for RON95 petrol, the expansion of Sales and Service Tax (SST) scope, and anticipated wage increases.
CIMB Securities Sdn Bhd in its note said MPC does not seem concerned about demand-pull inflationary pressures, reasoning that increased investments will boost the economy's productive capacity.
It added that plans to increase sales tax on non-essential items, further expand the scope of service tax, and rationalise RON95 subsidies by mid-2025, in which the criteria and implementation method are still under discussion, tilt inflation risk to the upside.
"Our base case assumes limited indirect pass-through from the re-targeting of RON95 subsidies which only aims to exclude foreigners and T15 consumers," it added.
OCBC Bank said that if the RON95 rationalisation proposed in Budget 2025 is implemented, retail prices could increase by 20 to 25 per cent from July 2025.
This adjustment could raise their average inflation estimate to between 2.6 per cent and 2.8 per cent year-on-year (YoY) for 2025."The caveat, however, is that the mechanism of implementation is unclear given that the subsidy removal will be targeted to a certain section of consumers," it added.