Bank Negara Malaysia’s (BNM) decision to leave the policy rate unchanged fell in line with our expectation as well as the market’s in general. BNM remains less dovish but cautious, and it appears that the central bank will continue to adopt the “wait-and-see” attitude

Going into 2020, the monetary easing outlook remains. Much will depend on how domestic activities will be able to support growth in an environment with external headwinds. We still see room for one rate cut in 2020, in which the probability based on current information stands at 40% i.e. in 1Q2020.

• The decision to leave the policy rate unchanged fell in line with our expectation as well as the market’s in general.

• In its latest policy statement, BNM remains less dovish but cautious. As opposed to the September statement, there was no mention of “downside risks”. But BNM maintained the tone of “subject to further downside risks” due to uncertainties from the external and domestic environments, trade tensions and low commodity prices.

• It appears that BNM will continue to adopt the “wait-and-see” attitude, and will most likely continue to stay behind the rate cutting curve for some time.

• In contrast to September’s meeting, this time around, BNM was more positive on the growth outlook citing “government measure will provide additional impetus”. Private sector spending will remain as the engine for growth.

• Hence, going into 2020, the monetary easing outlook remains. Much will depend on how domestic activities will be able to support growth in an environment where external headwinds remain.

• We still see room for one rate cut in 2020, in which the probability based on current information stands at 40% i.e. in 1Q2020.

Source: AmInvest Research - 6 Nov 2019