KUALA LUMPUR – A 100 basis points (bps) Overnight Policy Rate (OPR) hike is expected to be introduced between the second half of this year (H2 2022) and first half of 2023 (H1 2023).
Chief economist of Maybank Investment Bank Bhd, Suhaimi Ilias, said that this hike would be in line with the accommodative monetary policy procedure by Bank Negara Malaysia (BNM) that started with the 25 bps OPR increase in May this year.
In a virtual Maybank IB H2 2022 market outlook briefing held on July 4, he stated that BNM is expected to announce a 25 bps OPR increment during this week’s Monetary Policy Committee (MPC) meeting on July 6.
Additionally, he said that the MPC would likely increase interest rates by another 25 bps by the fourth quarter of this year with a further hike of 50 bps in H1 2023.
Maybank IB’s estimates that for every 25 bps OPR hike will result in a reduction of 0.2 percentage points of the real gross domestic product, spread out over 12 months.
Furthermore, Suhami said that the implications of hiking the OPR would include an increase of mortgage repayment by 3%.
According to him, BNM is likely to raise the OPR because of growing domestic demand along with the rising core inflation rate.
These factors made Maybank IB revise their inflation rate forecast upwards. The previous projection for inflation rate this year was 2.7% and revised to 3.4% while 2023’s projection is up to 4.1%, a leap from the previous forecast of 2.5%.
“This was due to the fact that we have incorporated higher prices of food items such as cooking oil and chicken, starting from July after the revised higher ceiling prices for standard whole chicken as well as the removal of subsidies for bottled cooking oil and the assumption of a review of fuel subsidy for next year,” he continued.
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