Bank Negara Malaysia will likely maintain the overnight policy rate (OPR) at 3.25 percent for the rest of the year and into 2016, reported Bernama citing RHB Research.
In a note, RHB Research said the BNM opted to keep the OPR unchanged during the 11 September monetary policy meeting as it believed the latest indicators showed continued growth of the economy in Q3 2015 despite ongoing adjustments to domestic and external developments.
However, the central bank underscored that downside risks to growth have increased due to moderating growth momentum within major emerging markets, heightened volatility in financial markets and uncertainty in commodity prices, said the research house.
“As inflation is expected to be contained in 2015 and 2016 while the ringgit continues to trade at a weak level, the central bank will likely put rates on hold for some time to come.”
Buoyed by sustained growth in economic activities, broad money (M3) growth is also expected to sustain at between four and five percent in 2016, matching this year’s estimated pace, noted RHB Research.
However, loan growth will likely moderate to between six and seven percent in 2016, from an estimate of 7.5 percent and 8.5 percent this year, due to curbs on the property market and stringent lending rules.
RHB Research expects the ringgit, which weakened by over 20 percent from last year, to push up imported goods prices, while lingering weak energy prices may continue to suppress inflation rate since it is about half the pace it posted over the same period last year.
It noted that the slower consumption spending after the implementation of the goods and services tax, elevated household debt at 85 percent of gross domestic product and tightening of the property sector will likely see a more subdued impact on inflation.
“As a result, inflation is expected to inch up slightly to 2.7 percent in 2016, from an estimate of 2.3 percent increase this year and compared with 3.1 percent growth last year,” added RHB Research.