Latest news with #OPR
New Straits Times
24-05-2025
- Business
- New Straits Times
Bank Negara has policy space as inflation remains contained: Economists
KUALA LUMPUR: Bank Negara Malaysia may have room to ease interest rates in the coming months as inflationary pressures remain contained and external economic headwinds build, economists said. April's consumer price index (CPI) data showed that headline inflation held steady at 1.4 per cent year-on-year, unchanged from March, despite festive-season spending during Hari Raya. Core inflation, however, inched up to two per cent, the highest in 17 months, driven by firmer price pressures in services and durable goods. Putra Business School economic analyst Prof Dr Ahmed Razman Abdul Latiff said the benign inflation backdrop, coupled with rising global risks, supports the case for a potential 25 basis-point reduction in the Overnight Policy Rate (OPR) in the second half of the year. He pointed to geopolitical tensions and reciprocal tariff measures by the United States (US) as key threats to global trade, which could spill over into Malaysia's export-oriented economy. Still, Razman expects domestic growth to remain resilient. "Despite all the uncertainties caused by US tariffs, the economic outlook for the second half of the year remains positive, supported by stronger trade activity and expected higher foreign direct investments," he told Business Times. He added Malaysia's chairmanship of Asean this year is also expected to lift domestic demand through enhanced regional collaboration. According to the Department of Statistics' (DOSM) report on Wednesday, price increases in April were led by personal care and housing costs. Personal care saw the sharpest rise at 4.1 per cent, while education and housing expenses increased between 2.0 and 2.3 per cent. Food and beverage inflation eased slightly to 2.3 per cent from 2.5 per cent a month earlier, helped by lower vegetable and dairy prices despite festive demand. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said while inflation is largely under control, Bank Negara may soon need to pivot its policy stance if growth slows meaningfully. "The current economic environment is highly fluid, which necessitates a careful and well-calibrated monetary policy response," he said, adding that a rate cut of 25 basis points could be considered if signs of a slowdown persist. He said gross domestic product growth in the second half could dip below four per cent, warranting policy support. This outlook is consistent with Hong Leong Investment Bank (HLIB) economist Felicia Ling's view that the inflation environment remains relatively benign. "Recent data suggests a benign domestic inflation with minimal inflationary pressures, leaving Bank Negara more room for monetary easing," she said in a research note. HLIB has maintained its full-year CPI forecast at 2.7 per cent but cautioned that global demand weakness and subdued commodity prices pose downside risks. Maybank Investment Bank chief economist Suhaimi Ilias said broader inflation trends have remained muted despite policy changes. "Inflation remains subdued at sub-two per cent year-to-date even with the 13.3 per cent minimum wage hike in February," he said. He added that the limited price pass-through may be attributed to the hike's initial application only to large employers. Meanwhile, DOSM said deflation persisted in certain segments, led by a 4.5 per cent fall in information and communication and a 0.1 per cent dip in clothing and footwear. Public Investment Bank economist Sabrina Edora said while inflation will likely stay below three per cent for the year, risks could emerge from domestic policy shifts. These include fuel subsidy reforms and a wider service tax net. Still, she believes any inflationary impact will be manageable if such reforms are introduced gradually and supported by offsetting measures. "Given the backdrop of lower global commodity prices, the near-term inflation trajectory is expected to remain benign, even in the event of subsidy rationalisation," she said. Bank Negara's latest monetary policy statement projected headline inflation to average between 2.0 and 3.5 per cent this year, with core inflation between 1.5 and 2.5 per cent. With three policy meetings left in 2025, in July, September and November, economists say the central bank has policy space if conditions deteriorate. A 25 basis-point cut in the third quarter is still on the table, Edora said, assuming stable macroeconomic conditions and continued electricity tariff subsidies.
Malay Mail
19-05-2025
- Business
- Malay Mail
Investment banks see BNM cutting OPR by 25 points in second half of 2025 as tariffs, weak GDP weigh on outlook
KUALA LUMPUR, May 19 — Investment banks expect Bank Negara Malaysia (BNM) to lower the Overnight Policy Rate (OPR) by 25 basis points (bps) in the second half of 2025 (2H 2025) amid softer first quarter (1Q) growth and tariff disruptions Public Investment Bank Bhd said the earlier 100 bps reduction in the Statutory Reserve Requirement (SRR) is expected to serve as a timely liquidity buffer, allowing BNM to maintain a data-dependent stance amid elevated external volatility. Should the 90-day tariff suspension lapse without renewal, raising Malaysia's effective tariff exposure to 24 per cent, the investment bank anticipated a more front-loaded policy response, comprising two 25 bps OPR cuts in 2H 2025. 'This would be intended to mitigate negative spillovers on trade performance, investment activity and broader economic sentiment. 'With three scheduled policy meetings remaining this year — July 9, Sept 4 and Nov 6 — the window for calibration remains open, though timing will depend on incoming data and developments surrounding global trade negotiations,' it said in a note today. Meanwhile, Hong Leong Investment Bank said the projection was made in view of external uncertainties and modest inflationary environment. As for Standard Chartered (StanChart), it continued to expect BNM to cut the policy rate by 25 bps in July, with more cuts (beyond 25 bps) in 2025 likely if data deteriorates by more than expected. The bank has lowered its 2025 gross domestic growth (GDP) growth forecast to 4.2 per cent from 5.0 per cent previously on weaker-than-expected 1Q GDP growth and tariff disruptions. 'We estimate that a 24 per cent and 10 per cent reciprocal tariff rate will subtract 0.7 percentage point (ppt) and 0.4 ppt respectively, from GDP, assuming that 30 per cent of Malaysia's exports are exempt from tariffs and a United States (US) import elasticity rate of 0.5 times. 'The hit to GDP from a fall in demand of trading partners will also likely weigh on growth in 2025,' it said. Nevertheless, StanChart expects consumer spending and investment are likely to remain the key pillars of growth in 2025. — Bernama
New Straits Times
13-05-2025
- Business
- New Straits Times
BNM's surprise SRR cut sparks speculation of possible OPR reduction
KUALA LUMPUR: Bank Negara Malaysia (BNM) is laying the groundwork for potential interest rate cuts after its surprise move to reduce the statutory reserve requirement (SRR) by 100 basis points last week, according to Moody's Analytics. In a report, economist Sunny Nguyen said the SRR cut, which injects about RM19 billion in liquidity into the banking system, gives BNM crucial time to assess the impact of US-led trade tariffs on exports, determine whether recent inflationary pressure is temporary, and monitor the next steps by the US Federal Reserve. "A lower SSR allows banks to lend more, boosting economic growth by increasing credit availability. Liquidity injections are the policy equivalent of loosening your tie in case you decide to change shirts," she said in a note. She expects the overnight policy rate (OPR) to remain at 3.00 per cent through August, with a likely 25-basis point cut to 2.75 per cent in September—provided inflation remains under control and the Fed begins easing. Nguyen noted that in the past (namely in 2009, 2016 and 2020), the central bank's playbook when markets were jumpy and the ringgit was on the defensive opened with an SRR cut. Once data confirmed an economic slowdown and inflation was no longer a concern, it followed with rate cuts. "That sequencing minimises foreign exchange volatility. Banks feel the relief immediately, and portfolio investors don't panic about a narrowing Malaysia‐US yield gap," she said. Historically, BNM has followed a predictable sequence of loosening the SRR ahead of rate cuts when inflation is under control and economic conditions weaken. This approach helps reduce volatility in the foreign exchange market, offers immediate relief to banks, and reassures investors concerned about narrowing interest differentials with the US. Nguyen noted that if the US Federal Reserve cuts rates first, it would ease pressure on the ringgit, allowing BNM to act without causing significant damage to the local currency. She also said that a lower Fed funds rate would benefit Malaysia by providing cheaper global financing, which would help mitigate the impact of tariffs on Malaysia's export-heavy electronics sector. Additionally, it would ease the rollover of pandemic-related debt. "In that environment, a token 25‐basis point cut to the OPR would be more about signalling that the central bank stands ready to act. However, if the Fed stays on hold for longer, or the unwinding of fuel subsidies sends inflation too high, BNM may be content to keep the OPR at 3 per cent. "The extra liquidity in the system will keep money market rates soft and ensure that credit flows, while the headline policy rate would protect the ringgit by maintaining the yield advantage," she said. Despite these challenges, Malaysia's inflation is projected to rise to 2.5 per cent by year-end, while GDP growth is expected to slow to 4 per cent in 2025 from 5 per cent in 2024. Domestic demand, buoyed by civil service pay increases and infrastructure projects like the East Coast Rail Link, will remain a key economic driver even as net export momentum slows.
New Indian Express
09-05-2025
- Politics
- New Indian Express
Brave soldier from Andhra Pradesh martyred in Indo-Pak clash
ANANTAPUR: A pall of grief descended over Pudagundlapalli Thanda in Gorantla mandal as news broke that Mood Murali Naik, a brave soldier of the Indian Army, was martyred in the ongoing conflict between India and Pakistan. Murali Naik, aged around 23, had joined the army in December 2022 and served under Army No: A3451489H, in the AV (OPR) trade. Murali Naik hailed from a humble background—his parents, M. Jyothibai and M. Sreeram Naik, are daily wage earners in the remote tribal hamlet. His sacrifice has brought both immense pride and profound sorrow to the village. On receiving the tragic news, Minister Savitha personally visited the bereaved family to offer condolences. On behalf of the state government, she handed over immediate financial assistance of Rs. 5 lakhs to support the family. In a heartwarming gesture, Chief Minister N Chandrababu Naidu spoke to the soldier's parents over the phone, expressing deep sorrow and solidarity. He assured the family that the state government would stand firmly by them. 'Do not lose heart; the government and the people of Andhra Pradesh are with you,' the Chief Minister said, promising further assistance and long-term support. As a tribute to the fallen hero, Minister Savitha announced that a statue of Murali Naik would be installed at the main circle in Gorantla, ensuring that his sacrifice would be remembered by future generations. Preparations are already underway for the installation. The final rites of the martyr will be held tomorrow, with full military honours. Army representatives are expected to participate, and state officials will be present to pay their respects.
New Straits Times
09-05-2025
- Business
- New Straits Times
Bank Negara to cut OPR in July?
KUALA LUMPUR: Bank Negara Malaysia's decision to keep the overnight policy rate (OPR) at 3.00 per cent may hold for now but economists expect a possible rate cut as early as July amid growing downside risks to the economy. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the current monetary policy stance remains appropriate, but weakening external conditions could prompt policy easing in the coming months. "We are still maintaining our call that the OPR will be reduced in the second half of 2025, possibly in July or September," he told Business Times. Afzanizam pointed to Bank Negara's recent move to lower the statutory reserve requirement (SRR) from 2.00 per cent to 1.00 per cent which will add RM19 billion of liquidity into the banking system as a signal that the central bank is preparing to support the economy if needed. "Although it is not a signal of monetary policy stance, it shows that Bank Negara will engage the necessary policy tools to support the economy," he said. Putra Business School associate professor Dr Ahmed Razman Abdul Latiff believes a rate reduction is becoming more justifiable, and July may be the most suitable window. He also believes Bank Negara should consider lowering the OPR to 2.75 per cent to help stimulate domestic demand in the face of external headwinds. He said Bank Negara is observing the current situation closely and most likely will make a decision once the implication of reciprocal tariff is made clear after the 90 days deadline. "In addition, the decision by the Federal Reserve (Fed) to maintain the current rate is also another factor for Bank Negara to maintain the same position," he said. Meanwhile, economist Dr Geoffrey Williams believes a cut is unnecessary in the near term as Malaysia's direct exposure is limited and upcoming trade agreements could offset the risks. In this period of uncertainty, Williams said it is important for Bank Negara to remain calm and steady. "Therefore, there is no need to cut rates now and I do not see a need in the foreseeable future for rates to be cut anytime soon. In fact the US Fed and most global banks are also holding a wait and see stance," he added. Bank Negara kept the benchmark interest rate unchanged yesterday, citing continued global growth and trade, supported by domestic demand and front-loading activities. The central bank has kept the OPR at three per cent for 12 consecutive meetings, since May 2023.
