KUALA LUMPUR – Maybank Investment Bank Bhd (Maybank IB) observes “hawkish” pivots among the central banks in the ASEAN region following the recent interest rate hikes implemented by the United States Federal Reserve (Fed).
The investment bank’s chief analyst, Suhaimi Ilias, said in a research note that the interest rate hikes had also sent fed funds rate (FFR) to a level higher than its last interest rate hike peak of 2.5%.
Suhaimi said that the Fed chairman Jerome Powell had also indicated a rate hike of between 50 and 75 basis points in its upcoming Federal Open Market Committee meeting slated to be held on July 26 and 27 this year.
He explained that Bank Negara Malaysia (BNM) is anticipated to raise overnight policy rate (OPR) as well but by 25 basis points in the upcoming Monetary Policy Meeting (MPC) to be held on July 5 and 6. This would be following the 25 basis points hike that took place after the May 10 MPC meeting.
According to Maybank IB, there is also the possibility of another 25 basis points increase by the end of this year. This scenario would bring the OPR rate to 2.5% and contrasts with the previous view which anticipated the 25 basis points hike only later in the second half of 2022, making the OPR 2.25%.
“We are maintaining our projection that the OPR would reach 3% in 2023,” Suhaimi stated.
Additionally, the Maybank IB analyst also said that the Bangko Sentral ng Philipinas (BSP) also indicated that they would increase interest rates in June and August 2022. This following the 25 basis points hike to 2.25% that happened in May and that they will be going “data-dependent” after that.
He said that the BSP’s policy interest rate projection is currently 2.75% for 2022 while it is expected to be 4% in 2023. He added that there will be an upside risk to ‘front-loading’ in 2022 given the above-mentioned indication by BSP on its policy rate trajectory for the near term.
Furthermore, Maybank IB also revised their projection on Bank of Thailand’s benchmark interest rate.
They are now anticipating a 50 basis point increase to 1% by the end of this year while next year’s forecast is anticipated to be 1.5%. This is a compared to their previous 25 basis points prediction for 2022 and 50 basis points for 2023.
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