Bank Negara Malaysia likely to increase Overnight Policy Rate by 25bps in September, says ANZ Research

Bank Negara Malaysia (BNM) is expected to increase its Overnight Policy Rate (OPR) by 25 basis points in September this year, with a strong growth environment providing the central bank opportunity to further normalize monetary policy, according to a recent report from ANZ Research.

The country’s headline inflation decelerated to 1.4 percent y/y and zero percent m/m in February from 2.7 percent y/y previously. The deceleration was broad-based, encompassing several major components of the CPI basket.

Of notice, was the fact that prices of components that can be characterized as ‘tradables’ witnessed a sequential decline, validating BNM’s view that the strong Malaysian ringgit is helping to suppress import prices.

Further to that, the BNM also stressed that inflation this year is expected to average lower than that in 2017.

"Our full-year 2018 CPI forecast is 2.7 percent and assumes that the impact of some supporting factors such as high base effects and easing food prices will potentially correct over a period of time," the report said.

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