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KUALA LUMPUR, Jan 21 -- The stance of Bank Negara Malaysia's (BNM) monetary policy remains 'neutral' following the Monetary Policy Committee meeting which kept the Overnight Policy Rate (OPR) at record-low of 1.75 per cent for the ninth consecutive meeting since July 2020, Maybank Investment Bank (Maybank IB) said.
In a research note, Maybank IB said the view is backed by the positives of continued global economic recovery and the domestic economy’s rebound last quarter.
This is expected to gain momentum this year, but would still be tempered by risks of weaker-than-expected global growth; worsening supply chain disruptions; and emergence of severe and vaccine-resistant COVID-19 variants of concern.
With regards to US Fed’s monetary policy normalisation or tightening cycle, Maybank IB said the pressure for BNM to react is mitigated by the absence of '2013 Taper Tantrum' like market impact, that is, the equity market benchmark index, change in the 10-year Malaysian Government Securities (MGS) yield, and ringgit per US dollar, reflecting lower foreign holdings of Malaysian financial assets
"We maintain our call of unchanged OPR for much of 2022 before a +25 basis points (bps) rise in fourth quarter (4Q) 2022 which is on the Nov 2-3, 2022 MPC meeting, followed by a +50bps hikes in 2023," the research firm said.
Meanwhile, Public Investment Bank (PublicInvest Research) said the status quo decision on OPR by BNM was largely expected as the economy will continue to see spillover impacts from large fiscal spending last year, which is the RM530 billion COVID-19 fiscal stimulus expenditure through the various stimulus packages.
It said economic momentum is set to gain more traction in 2022 following a lag impact of expansionary fiscal and monetary strategies. This will also be aided by full economic openings, given that all states have transitioned into phase four of the National Recovery Plan (NRP).
"This positive development could underpin a nascent recovery in contact-sensitive service-related sectors like airlines, land transport, hotels & restaurants, entertainment & theme parks, medical tourism and travel agents, a much-needed lifeline for the sub-sectors which have borne the brunt of the COVID-19 pandemic," said PublicInvest Research.
Economic activity will also be pushed by sustained output generation by manufacturing, mining and agriculture, thanks to full economic openings in key regions, improvements in global pandemic conditions and rapid structural changes in the global telecommunication sector.
Economic momentum will also be driven by favourable external conditions, thanks to vaccine-powered recoveries around the world.
Other growth drivers may come from various initiatives to create more than one million jobs this year, pushing unemployment to ease progressively and reaching a full employment condition.
"The data-dependent strategy by the central bank following the lag impact of stimulus spending and accommodative interest rate environment should see the OPR remaining steady before the central bank resumes to normalise interest rate in 2H22.
"This move is imperative, among others, to prevent financial imbalances in the economy apart from preemptive measures to avert inflation from creeping up sharply," PublicInvest Research said.
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