KUALA LUMPUR: Bank Negara Malaysia is expected to raise the Overnight Policy Rate (OPR) in the second half (2H) of 2022, MIDF Research said.
The central bank has decided to maintain the interest rate at 1.75 per cent after the two-day Monetary Policy Committee (MPC) meeting today.
MIDF Research said however, the decision would be subject to the stability of economic growth, pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.
"We believe the current focus of Bank Negara's monetary policy setting is to ensure a sustainable recovery of Malaysia's economy, especially coming out from the long containment measures imposed last year.
"With the rate of inflation hovering within Bank Negara's forecast, we opine there is less pressure for it to quickly shift towards policy tightening.
"From a medium-term perspective, the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as the persistently high inflation and a further rise in household indebtedness," it said in a note today.
MIDF Research said Bank Negara's decision to keep the OPR unchanged at 1.75 per cent in its first MPC of 2022 was in line with the firm's and market's expectations.
It said the current rate was deemed to be appropriate and supportive of Malaysia's economic growth.
In its monetary policy statement, Bank Negara highlighted that the growth momentum was expected to improve in the fourth quarter (Q4) 2021 underpinned by the easing of restrictions, reopening of domestic economic activities and higher vaccination rate.
"We view the decision to keep OPR at current low levels is appropriate to provide support to Malaysia's economic recovery," MIDF Research said.
