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KUALA LUMPUR, Jan 20 -- Bank Negara Malaysia (BNM) may refrain from any rate cut in 2022 due to a better outlook for economic recovery, said OCBC Bank.
In a statement today, its chief economist Selena Ling opined that the central bank will remain committed to supporting growth for as long as it can by keeping the policy rate anchored at the current low level.
According to her, BNM can and will leave its overnight policy rate (OPR) unchanged at 1.75 per cent throughout 2022.
"Apart from the domestic inflation outturn, perhaps what matters more ultimately will be the global market sentiment.
"The chief risk is that the United States Federal Reserve (Fed) fund rates outlook has shifted so quickly that the scenario of market ructions compelling emerging market central banks -- including Malaysia’s -- to raise rates to anchor sentiment can no longer be ruled out," she said.
BNM will announce its OPR decision following its two-day Monetary Policy Committee (MPC) meeting which ends later today.
Touching on inflation, Ling said core inflation is expected to remain low at below one per cent for this year, while headline inflation is projected to remain moderate in 2022.
In terms of economic growth, she said OCBC Bank is projecting that Malaysia's gross domestic product is likely to pick up to five percent in 2022 from the expected 3.2 per cent, backed by the supportive exports outlook.
While the growth projection is encouraging, Ling cautioned that the pace may not be as smooth as the official forecasts.
"The government is pencilling in growth of 5.5 to 6.5 per cent in 2022, which strikes us as being rather optimistic, especially given the lingering structural headwinds facing consumption recovery," she said.
Moreover, Ling noted that the Employees Provident Fund (EPF) withdrawal schemes -- an integral part of the stimulus packages -- had resulted in a cleaving out of savings for households that might take a while to rebuild, resulting in curtailed consumption growth in the coming years.
"Given that under the EPF guidance, as much as RM240,000 is said to be necessary for basic retirement needs, the depleted balances for a considerable portion of Malaysians in their EPF accounts is a concern, and may act as a drag on private consumption on the path towards recovery.
"Hence, as much as we agree and do hope that the worst is now over, we are of the view that the recovery pace may not be as robust as assumed by the government," she said.
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