Maybank IB maintains expectation of 25 bps interest rate hike by Bank Negara this year

KUALA LUMPUR, April 12 — Maybank Investment Bank Bhd (Maybank IB) has reiterated its expectation of a modest benchmark interest rate hike of 25 basis points (bps) by Bank Negara Malaysia (BNM) later this year.

The central bank has stated that the interest rate is more of an instrument of demand management to address “demand-pull” and “wage-driven” inflation, thus less suitable for dealing with a “cost-push” inflation.

In a note today, Maybank IB said the inflation rate in the country was relatively stable at 2.3 per cent in the first two months of 2022 (2M2022) after the 2.5 per cent rise in 2021 consumer prices.

It said food, electricity, gas and other fuels, and transport — fuels and lubricants were the biggest contributors, accounting for 82 per cent of the inflation rate in 2M2022.

“Overall, inflation in Malaysia is still driven by the commodity price-sensitive elements of CPI.

“The tame inflation numbers so far reflected the prevalence of food, fuel and transport subsidies as well as price controls such as fuel (RON95, diesel, liquefied petroleum gas) and cooking oil price subsidies, chicken and eggs production subsidy for the poultry industry and the freeze on base electricity tariffs for all electricity users in Peninsular Malaysia from Feb 1, 2022 until end-2024,” it said.

As for other Asean countries, Maybank IB has kept its 25 bps interest rate hike projection for Thailand, while expecting a bigger hike in Indonesia (75 bps) and the Philippines (50 bps).

It said inflation risk remains on an upside bias as per the trend in producers price index (PPI), signalling continued near-term upward pressures on CPI.

“This is exacerbated by prolonged supply risks and disruptions due to the risk premiums on global commodity supplies and prices following the global market turmoil caused by the Russia-Ukraine war and the resultant economic, trade, investment and financial sanctions on Russia.”

It also noted that the prolonged global supply chain disruptions due to China’s continued zero Covid-19 policy also weighed on inflation. — Bernama