Research houses are projecting that the authorities will increase the overnight policy rate (OPR) by 25 basis points in the second half of this year due to upward inflationary pressures.
Maybank Investment Bank (IB) Research said an OPR hike is imminent and upward inflationary pressure remained due to the higher domestic cost.
"We expect a 25-50 basis points increase in the OPR during the second half of this year, where there are three Monetary Policy Committee (MPC) meetings in July, September and November," the research firm said in a note today.
Another research house, RHB Research, said the central bank in its Monetary Policy Statement (MPS) yesterday also laid the ground for a possible adjustment in monetary accommodation in the near future.
It said the "adjustment" was to ensure the risks arising from the imbalances would not hamper economic growth.
"This is in line with our expectation of a 25 basis points hike in the OPR towards the late third quarter this year," it said.
Bank Negara Malaysia yesterday decided to maintain the OPR at 3.0%, keeping it unchanged for more than two years.
According to the central bank, Malaysia’s growth will be sustained into 2014, anchored by domestic demand and supported by improved external environment.
Domestic demand will be led by capital spending by the private sector, particularly in the manufacturing and services sectors, while private consumption will be underpinned by stable income growth and favourable labour market conditions.
An improved external environment will be driven by the recovery in the advanced economies and regional demand while the global economy is expected to remain on a path of gradual recovery, despite a moderation in the first quarter. – Bernama, May 9, 2014.