The decision to leave the OPR unchanged at 3.00% by BNM fell in line with our expectations. Also, we saw no changes to the statutory reserve requirement which is at 3.50%. In the policy statement, BNM remains upbeat on the growth prospects and confident over a moderate inflation outlook in 2H2017.

We reiterate our base case view of no rate hike in 2017 as BNM will continue to weigh between growth prospects and inflation. With the ringgit expected to stay healthy as our fair value is between 4.12 – 4.15 against the USD, our full-year average outlook is at 4.33. Thus, room for ringgit to stay firm remains, suggesting it should help ease pressure from import cost and limit the risk of potential transfer pricing.

Meanwhile, we maintain our 45% chance for a rate hike in November by 25 basis points. This could happen if the GDP continues to grow stronger and inflation becomes sticky downwards due to the pressure emanating from stronger demand-pull as opposed to cost push.

• As expected, Bank Negara Malaysia (BNM) in its Monetary Policy Committee (MPC) meeting left the overnight policy rate (OPR) at 3.00%, a decision that fell in line with our expectations. Also, we saw no changes to the statutory reserve requirement which is at 3.50%.

• In the policy statement, we saw BNM remaining upbeat on the domestic growth outlook, citing the strong contribution from exports should result in positive spillovers on the economy apart from the domestic activities’ contribution.

• At the same time, BNM remains confident on a moderate outlook for the headline and core inflation, largely supported by softer domestic fuel prices and smaller effect from global cost factors. Also, the underlying inflation (core inflation) will be sustained by robust domestic demand. However, it is expected to remain contained.

• We reiterate our base case view of no rate hike in 2017 as BNM will continue to weigh between growth prospects and inflation. With the ringgit expected to stay healthy as our fair value is between 4.12 -4.15 against the USD, our full-year average outlook is at 4.33. Thus, room for the ringgit to stay firm remains, suggesting it should help ease pressure from import cost and limit the risk of potential pricing transfer.

• Meanwhile, we maintain our 45% chance for a rate hike in November by 25 basis points. This could happen if the GDP continues to grow stronger and inflation becomes sticky downwards due to the pressure emanating from stronger demand-pull as opposed to cost push.

Source: AmInvest Research - 8 Sept 2017