Tone Of MPS Still "Hawkish" With Continued Reference To Financial Imbalances

KUALA LUMPUR, July 11 (Bernama) -- The tone of monetary policy statements (MPS) is still "hawkish" given the continued reference to financial imbalances which was a strong signal of impending overnight policy rate (OPR) hike, said Maybank IB Research.

"The tone of the MPS is still "hawkish" in our view amid remarks such as firm growth prospects and inflation remaining above its long-term average," it said after Bank Negara Malaysia (BNM) raised the OPR to 3.25 per cent after yesterday's Monetary Policy Committee meeting.

The OPR remained capped at 3.00 per cent since May 2011, when the last rate action was a 25 basis points hike.

Maybank IB Research expected a further 25 basis points increase by year-end with two meetings remaining on September 17-18 and November 5-6.

"BNM looks like keeping the door open for another rate hike this year given its statement that "further review of the degree of monetary accommodation will depend on the MPC's assessment of the balance of risks surrounding the outlook for domestic growth and inflation," said Maybank IB Research.

At the same time, the MPC will also continue to monitor for risks of destabilising financial imbalances.

"Hence, we expect another 25 basis points increase in OPR by year-end with two MPC meeting left," it added.


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