Tuesday, 10 July 2018

(The Star) OPR seen on hold

PETALING JAYA: Bank Negara is expected to keep the overnight policy rate on hold at 3.25% and maintain a neutral stance, said Standard Chartered Global Research.

The central bank is scheduled to announce its monetary policy decision tomorrow.

In its Asia data preview note, the research body of Standard Chartered also expects Malaysia’s growth to moderate from strong levels in 2017, but remain firm.

“The effective zero-rating of the Goods and Services Tax as of June 1 is likely to result in a one-off dip in inflation.

“However, Bank Negara is likely to look past the volatility in inflation and focus on growth in its monetary policy decision-making.

“We maintain our status quo call for 2018, as we expect growth to moderate from strong levels in 2017, but remain firm,” said Standard Chartered Global Research.

Standard Chartered Global Reserch added that a potential risk to its call is if the ringgit faces strong depreciation pressure on a broader weak risk sentiment.

In such an event, there would be a need for the central bank to hike rates to maintain foreign exchange stability.

Apart from that, the research body expects industrial production growth in May to ease to 2.8% year-on-year from 4.6% in April, due to three fewer working days in May this year, as compared to the previous year.

This is due to the election polling day and two days post-election, which were declared holidays.

The Department of Statistics will release industrial production data for the month of May on Thursday.

“We think the mining sector was supported by a pick-up in crude oil production of 3.4% year-on-year, likely due to higher oil prices.

“However, the sector may have been weighed down by a 7.8% year-on-year fall in crude palm oil production due to lower CPO prices. Passenger car production fell 7.5% year-on-year and probably also weighed on overall industrial production growth,” said Standard Chartered Global Research.