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StanChart expects BNM to cut OPR by another 25 basis points
Published on: Wednesday, January 11, 2017

Kuala Lumpur: Standard Chartered Bank (StanChart) expects Bank Negara Malaysia (BNM) to cut the Overnight Policy Rate (OPR) by another 25 basis points to 2.75 per cent, from the current three per cent, in May this year.

Stanchart's Head of Economic Research for Asean, Edward Lee Wee Kok, said the cut was necessary mainly because the growth expectation, which started to pick up in the last quarter of 2016, may not filter into the second half of 2017.

"We see the interest rate cut to be in May this year generally because in the first half of this year people do expect things to remain stable as there was rate cut in July last year.

"The bank will look at the financial conditions this year," he said.

Lee said if the money supply grew and there were not moves to ease monetary policy conditions to support growth, then BNM may have to cut the rate.

Besides that, BNM would also take into consideration the external market conditions in the US and China to make the move, Lee said.

He said the country's economy this year was expected to grow at a moderate pace.

"This is partly contributed by consumer consumption and to the employees' option of reducing their Employees' Provident Fund contributions from 11 per cent to eight per cent.

"The move would allow more money to circulate in the system and hence stimulate the economy," he said. Meanwhile, Lee said, a pick-up in inflation was expected as the employment rate has slowed down and this would affect consumption.

"Consumption will still be a big contributor to the gross domestic product growth, but it may not remain as strong as last year," he said.

Lee said due to these reasons, the bank's forecast for Malaysia's GDP growth target this year dropped to 3.8 per cent from four per cent. – Bernama

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