KUALA LUMPUR: HSBC Global research believes Bank Negara Malaysia (BNM) has no reason to hike or to cut the overnight policy rate (OPR), with it likely to eep OPR at three per cent on May 9.

BNM will issue its third Monetary Policy Statement for the year this Thursday.

HSBC Global research Asean economist Yun Liu said a largely benign inflationary environment and a nascent economic recovery point to keeping policy on hold.

"While we see little reason to hike, there appears to be equally little reason to ease. After all, fundamentals have improved, with first quarter gross domestic product (GDP) growth inching up to almost 4 per cent year-on-year. We expect to see punchier growth in the second half of 2024 as the electronics cycle turns more broad-based. Meanwhile, upside risks to inflation linger given the uncertainty of subsidy rationalisation," she added.

Liu said given the repricing of the Federal Reserve rate cuts and prolonged greenback strength, it does not believe BNM will follow suit of Bank Indonesia (BI) and Banko Sentral ng Pilipinas (BSP) to deliver a 25 basis points rate hike each.

"BNM resisted pressures to hike last November, and we expect the same this week," Liu said in a note today.

She said while the ringgit has been facing downward pressures, it is important to realise that a rate hike is not a panacea.

In fact, some Asian central banks' recent experience suggests that a rate hike would not necessarily turn the tide for US dollar strength.

After the ringgit approached RM4.8 in mid-April, it has appreciated close to 1.5 per cent since then.

"While some regional peers have recently resumed rate hikes, we do not believe the same conditions apply to Malaysia."Not only do we expect the central bank to keep its policy rate unchanged at 3.0 per cent, but its neutral tone is likely to persist in the coming statement, added the research house.

On growth, Liu expects BNM to continue to sound cautiously optimistic, citing the turn in the global trade cycle. On inflation, BNM will likely keep to its "wait-and-see" approach pending better clarity on the policy front.

"As for the overall tone, we expect BNM to continue using the same language, such as "the monetary policy stance remains supportive of the economy", reflecting that the central bank is comfortable with the current policy rate," Liu said.

https://www.nst.com.my/business/economy/2024/05/1047041/hsbc-research-no-reason-hike-or-cut-bnm-likely-stay-pat-opr