KUALA LUMPUR: Bank Negara Malaysia (BNM) is expected to keep the overnight policy rate unchanged at 3.0 per cent on Sept 5, 2024, according to economists.
Standard Chartered (StanChart) said that it continues to expect a modest 0.1 percentage points impact on inflation from the target subsidy cut.
"We therefore maintain our view that BNM will stay on hold for the rest of the year, while we note that risks are biassed more towards a rate hike than a cut," it added.
StanChart noted that the July inflation was benign, with headline inflation at 2.0 per cent and core inflation at 1.9 per cent year-on-year, showing limited signs of second-round effects or pass-through from the targeted diesel subsidy rationalisation.
"BNM is also likely to maintain its view that ringgit moves are driven by external factors. Concerns about the ringgit have eased over the past few meetings amid ringgit outperformance since end-February," it added.
Economist Dr. Geoffrey Williams said that inflation is currently in the normal range, the economy is growing, and BNM has met two of its three targets of price stability and sustainable economic growth.
He added that the financial market and the country's economy is witnessing robust growth.
"The ringgit has strengthened, and overall the macroeconomic environment is in good shape. So there is no need to change rates.
"The Akaun Fleksibel withdrawal amount is less than expected, so that should not be inflationary, but two slight risks arise first from economic growth above potential, which can cause inflation in the future, and the appreciation of the ringgit, which can add to import price costs," he told Business Times.
Williams said that both are minor concerns that should not impact interest rates.
"Based on this, we expect the OPR to remain at 3.0 per cent," he said.