Malaysian central bank likely to hike interest rate in January

The Malaysian central bank, Bank Negara Malaysia, is set to meet next week for its rate decision. According to an ANZ research report, the BNM is likely to hike its Overnight Policy Rate by 25 basis points to 3.25 percent. Even with this rise, the overall monetary policy stance would still be accommodative, as real rates continue to be at negative levels.

With the Malaysian economic growth accelerating to 6 percent in 2017 and estimated to remain strong at 5.8 percent this year, inflation pressures are expected to emerge. Increased oil prices would exert additional upward pressure on inflation, which at 3.9 percent for 2017 is at the top end of BNM’s forecast range and likely to remain elevated in 2018. Thus, additional removal of monetary accommodation would possibly be required later in the year.

“We expect another 25bp hike at the September meeting to take the OPR to 3.50 percent, a level last seen in November 2008”, stated ANZ.

Increased oil prices, if sustained, would improve the nation’s external and fiscal position. Along with stronger domestic growth and higher interest rates, this would underpin the ringgit.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest