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KUALA LUMPUR, May 25 (Bernama) -- RHB Investment Bank Bhd has revised its Bank Negara Malaysia (BNM) overnight policy rate (OPR) forecast to 2.25 per cent from 2.0 per cent for 2022 with another 25 basis points (bps) hike to arise in September’s Monetary Policy Committee meeting.
In a note, the bank said its end-2023 OPR forecast is also revised to 2.75 per cent from 2.50 per cent.
“We are relatively more sanguine on the OPR path in 2022 to 2023 relative to consensus due to factors such as the global food and oil prices are likely to stabilise if not consolidate on a sustained basis in the second half of 2022 (H2 2022).
"Global supply chain congestions as it relates to Malaysia will most likely ease in H2 2022; core consumer price index (CPI) inflation on a year-on-year (y-o-y) basis is likely to peak at 2.4-2.6 per cent by the third quarter of 2022 (Q3 2022); the current fuel and food subsidies will remain in place for 2022; and the worst of the sell-off in the domestic government bond market and upward pressure on US dollar compared to the ringgit is perhaps behind us," it said.
The bank noted that although the economy will accelerate in the second quarter of 2022, these dynamics are unlikely to lead to sustained upward pressure on core CPI inflation beyond Q3 2022 as commodity prices stabilise and supply chain pressures ease in H2 2022.
“OPR hikes beyond 2022 to the neutral rate of 3.0 per cent will be driven by the BNM normalising policy rates since the economy will no longer be in “critical condition or facing large headwinds” like it did in 2019-2021.
“Hence, the need for very loose monetary conditions is behind us and policy normalisation is the optimal path for the future, in our view," it added.
Meanwhile, RHB Investment has maintained its 2022 CPI inflation forecast at 2.6 per cent y-o-y versus BNM's forecast of 2.2-3.2 per cent.
“Core CPI inflation is printing very close to our forecasts where we have been indicating since early 2022 that a print of around 2.0 per cent y-o-y would materialise by April.
“Our May core CPI inflation forecast is maintained at 2.2-2.4 per cent. The BNM 2022 core CPI inflation forecast is 2.0-3.0 per cent. We expect core CPI inflation to accelerate till Q3 2022 as demand side pressures rise,” said the bank.
Earlier today, the Department of Statistics Malaysia announced that the CPI in April 2022 increased 2.3 per cent to 125.9 compared with 123.1 in the same month of the preceding year.
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