KUALA LUMPUR: Analysts project that Bank Negara Malaysia will keep the overnight policy rate (OPR) steady at 3.00 per cent for the rest of the year.
Hong Leong Investment Bank Bhd (HLIB) noted that Bank Negara maintains a positive outlook on Malaysia's growth prospects, fueled mainly by domestic demand and a favorable increase in exports.
The bank highlighted that inflation is forecast to stay moderate, yet it remains sensitive to potential shifts in domestic policies and global circumstances.
"Separately, the ringgit's performance had also improved following BNM's engagement measures to encourage the conversion of foreign investment income.
"Pending details on the subsidy rationalisation plan as well as other income supporting measures, we continue to expect Bank Negara to keep OPR at 3.00 per cent for the rest of the year," it said.
Public Investment Bank (PublicInvest) said Bank Negara has duly recognised the global economy continues to expand amid resilient labour markets in some countries and continued recovery in global trade.
Looking forward, the bank said the trajectory of global growth is anticipated to maintain its momentum, with prevailing headwinds stemming from tightened monetary policies and reduced fiscal support being mitigated by favourable labour market dynamics and a tempered inflationary environment.
"While recent months have witnessed a gradual decline in both headline and core inflation on a global scale, the deceleration in disinflationary trends within certain advanced economies suggests a potential prolonging of elevated interest rates, particularly in the United States.
"However, the outlook for growth remains susceptible to downside risks, chiefly emanating from potential escalations in geopolitical tensions, unforeseen spikes in inflationary pressures, and fluctuations in global financial markets," it said.
In conclusion, PublicInvest said recent developments reinforce its stance on retaining the OPR at 3.00 per cent throughout the remainder of the year.
It said the robust inflationary and economic indicators in the US suggest a potential deceleration or moderation in US Fed Funds Rate (FFR) cuts, bolstering the strength of the US dollar and placing pressure on the ringgit.
"Consequently, our revised forecast for ringgit stands within 4.55–4.65 by the end of the year," it added.
Meanwhile, CIMB noted that Bank Negara's decision to maintain the OPR at 3.00 per cent for its sixth consecutive meeting was widely anticipated, amid the central bank's continued data-dependency monetary policy stance ahead of fuel subsidy rationalisation details that may impact inflation.
CIMB also highlighted the upgrade in Malaysia's growth prospects, attributed to a more favourable outlook for exports and global demand.
The bank said that the market response to Bank Negara's OPR decision was muted, with the ringgit closing unchanged.
It noted that deputy governor Adnan Zaylani said post-market hours that primary tools are being deployed to maintain ringgit stability and prevent excessive depreciation, eemphasising that the OPR is not an effective tool for defending the ringgit.
Furthermore, Bank Negara announced plans to facilitate the pre-approval of overseas reinvestments for firms, aiming to incentivise the repatriation of foreign proceeds.
"Bank Negara said it is working to pilot a fast-track pre-approval framework for corporates to re-invest overseas, should they opt to bring back their foreign currency funds and convert to ringgit.
"The pilot project is considered after it found that many corporates were not bringing their foreign currency balances back, to avoid the approval process for reinvesting abroad," CIMB said.