OCBC Bank Senior Economist : Only a 30 per cent chance for an OPR hike

KUALA LUMPUR: OCBC Bank's Senior ASEAN Economist Lavanya Venkateswaran believes that there is only a 30 per cent chance that Bank Negara Malaysia (BNM) will announce a 25 basis points hike in the overnight policy rate (OPR) tomorrow.

The OPR is a baseline rate for banks to determine the rate for funds borrowed.

"Our baseline is for BNM to keep its policy rate unchanged at 3.00 per cent at its July 6 meeting after surprising with a 25 basis point hike at its May 3 meeting. Our view is premised on weaker incoming activity data since May 3, pointing to slower growth momentum in the second quarter of 2023 alongside easing inflationary pressures," Lavanya said in her BNM Monetary Policy Committee meeting preview yesterday.

She assign a 70 per cent probability to BNM maintaining its policy rate on 6 July and a 30 per cent probability to a second consecutive 25 basis point hike after the hike on May 3. 

The Monetary Policy Committee will meet today and tomorrow to discuss, among others, action on the OPR.

"We assign a 70 per cent probability to (BNM holding action on the OPR)  and acknowledge that there are some factors that weigh in favour of an incremental hike. That said, the risk of additional tightening will rise more noticeably, in our view, if inflationary pressures build from the implementation of targeted fuel subsidies.

Lavanya maintains her 2023 headline consumer price index (CPI) forecast of 2.9 per cent, within BNM's 2.8-3.8 per cent forecast range.

A Monetary Policy Statement on the OPR is expected at 3pm tomorrow.

Related Articles