Friday, September 9, 2011

BNM unlikely to hike OPR until 1H 2012

KUALA LUMPUR: Bank Negara Malaysia, which kept the overnight policy rate (OPR) unchanged at 3%, is unlikely to raise the interest rates until the first half of 2012 when economic conditions show a firmer recovery.

CIMB Economics research said on Friday, Sept 9 the central bank could tolerate a brief period of real negative interest rates as the downside risk to growth takes precedence over inflation risk.

'Our view is that BNM will stick to a wait-and-see approach to safeguard growth whilst monitoring the need to adjust the benchmark interest rate according to developments in inflation and the economy.

'As such, we expect BNM to keep the policy rate at 3.00% until 1H12. BNM is likely to start raising the OPR, probably to 3.50% in 2H12,' it said.

In its assessment of BNM's statement on Thursday, CIMB Research said the central bank's decision to maintain the OPR for the second time was due to concerns that risks were tilting to the downside.

The research house said this was not surprising due to worries over the global economy.'' The tone of the policy statement suggested that BNM will continue to remain on the sidelines as long as the global uncertainties persist.

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