BNM is expected to keep OPR at 3.0% until year-end

By BERNAMA

RHB Research expects Bank NegaraMalaysia (BNM) to keep its Overnight Policy Rate (OPR) at 3.0 percent until year-end, after raising it to the current level in May 2011.

The BNM Monetary Policy Committee opted to maintain the OPR at 3.0 percent yesterday. This is the 12th successive meeting at which the central bank has kept the OPR unchanged.

In a note today, RHB Research in agreeing with BNM’s assessment, said risk to the OPR however, is on the upside, if the global economic recovery turns up to be stronger than expected.

“Although inflation is envisaged to trend up this year, it is likely to remain manageable and not expected to pose a major threat to the economy.

“This, coupled with downside risks posed by a challenging external economic environment, suggests that BNM will likely tolerate a slightly higher inflation rate,” it added.

RHB Research said inflation is projected to trend up to around 2.5 percent this year, from 1.6 percent in 2012.

“BNM, on the other hand, expects inflation to inch up to 2.0-3.0 this year,” it added.

In a separate note, Kenanga Research said it was confident that the OPR is apt to be supportive to the economy, and remains optimistic on the stability of the market.

Moving forward, the research house said it continues to believe that the OPR would remain at the current level for the rest of the year.

It added that with the general election over, things ought to pick up quickly and trend upward for the rest of the year.

Meanwhile, Alliance Research said the BNM’s decision on the OPR rate was in line with its house and market’s expectation.

“Subsidy rationalisation may be gradually implemented to soften the burden of the people. Therefore, we expect a steady OPR rate at 3.0 percent, until the year-end,” it added.

-BERNAMA