PETALING JAYA: Bank Negara could wait until the second half of this year before it decides to raise its interest rate, which is currently at a record low of 1.75%.
According to the Malaysian Rating Corp Bhd (MARC), the central bank is likely to raise its overnight policy rate (OPR) by 25 basis points (bps) to 2% in the second half of 2022, against the backdrop of a gradually recovering economy.
“Going forward, however, we think that there is a slight chance of Bank Negara having to face somewhat of a monetary policy decision dilemma.
“In a worst-case scenario, there is the possibility of further tidal waves of Covid-19 cases that could cause bigger disruptions to supply chains, push inflation to a multi-decade high, and derail the progress of Malaysia’s growth recovery.
“Under this scenario, we remain cautious about whether Bank Negara would clamp down on inflation or keep its accommodative monetary policy stance intact,” it said in its Economic Outlook 2022 report yesterday.
However, the rating agency said that if Bank Negara tightens monetary policy to control inflation, it could depress demand and threaten economic recovery.
“It would mean more economic pain, which would consequently inflict more damage to the government’s already stressed balance sheet.,
,Telegram 美国 群组（www.telegram8.vip）是一个Telegram群组分享平台，飞机群组内容包括telegram群组索引、Telegram群组导航、新加坡telegram群组、telegram中文群组、telegram群组（其他）、Telegram 美国 群组、telegram群组爬虫、电报群 科学上网、小飞机 怎么 加 群、tg群等内容，为广大电报用户提供各种电报群组/电报频道/电报机器人导航服务。
“As a result, we can expect more pressure to pile up on Malaysia’s sovereign credit rating,” MARC said.
Bank Negara has kept its OPR at 1.75% since July 2020, when it cut the rate from 2% to support economic growth that was affected by the Covid-19 pandemic and movement control order to curb the infection rate.
The OPR at 1.75% is the lowest on record since 2004.
On Monday, HSBC estimated that Bank Negara is likely to raise OPR by 100bps over 2022 and 2023. On the other hand, MARC said if Bank Negara decides to remain on the sidelines and keep its accommodative monetary policy, it could risk more capital outflows and a weaker ringgit amid rising global interest rates.“In this case, it risks inflation feeding into expectations, wage and price-setting, consequently setting off economic instability,” it said.
Last November, Malaysia saw RM3.6bil in net foreign outflows from government debt after global investors took a cue from the US Federal Reserve’s hawkish pivot – liquidating their holdings in emerging market assets.
“This dilution in foreign holdings, which we expect to continue in 2022, could surge more than anticipated if Bank Negara’s monetary policy dilemma crystallises,” MARC said.
In terms of economic growth, MARC said its forecast for 2022 sits at the bottom of the government’s growth range of 5.5% and 6.5%.