KUALA LUMPUR, Nov 17 — BMI, a Fitch Solutions company, expects Bank Negara Malaysia (BNM) to hold its overnight policy rate (OPR) at 3.0 per cent through the end of 2024.

It noted that the central bank had on Nov 2 for the third consecutive meeting, left the OPR unchanged, which was in line with its consensus and expectations.

"We continue to expect BNM to keep its OPR on hold at the next meeting on January 24 and through the end of 2024,” it said in a statement today.

BMI observed that the country’s domestic inflation has been on a clear downward trajectory and expects inflation to ease over the coming months to touch 1.8 per cent by the end of 2023.

"The central bank remains primarily concerned about price stability and noted upside risks to its view for headline inflation to ease in 2024.

"While BNM expects inflation to remain modest in 2024, it did note upside risks to this view as the government contemplates revising subsidies and price controls next year,’’ BMI said.

While core inflation remains above its five-year average of 1.6 per cent, BMI said it has continued to ease significantly from a peak of 4.2 per cent y-o-y in November 2022 to 2.5 per cent in September and is on track to meet BNM’s core and headline inflation to average between 2.8 per cent and 3.8 per cent this year.

"As we expect growth to pick up in the second half of 2023, our prevailing forecast for Malaysia’s real gross domestic product growth of 4.0 per cent in 2023 and 4.4 per cent in 2024, sits at the lower end of BNM’s 4.0-5.0 per cent target, and below the pre-pandemic average (2015-2019) of 4.9 per cent,” it noted.

On the ringgit, BMI expects the central bank will not want to loosen monetary policy as this might risk destabilising the ringgit and exerting further downside pressure on the currency.

"The ringgit has come under significant pressure, having depreciated by 6.5 per cent against the US dollar year-to-date.

"This did not go unnoticed by BNM, which noted in its monetary policy meeting minutes that the expectations for a higher-for-longer interest rate environment in the United States have led to renewed dollar strength,” it added. — Bernama