KUALA LUMPUR: Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 3% at its next meeting tomorrow, said Nomura Global Markets Research in a report yesterday.
“We are revising our near-term policy rate forecast and now expect Bank Negara to stay on hold at its next meeting on Nov 23 as opposed to our earlier baseline of another 25-basis-point (bps) cut in the OPR. Instead, we forecast a 50bps cut in the statutory reserve requirement ratio (SRR) from 3.5% currently,” it said.
The change in its forecast, according to Nomura, is based on its internal model and likely reflected financial imbalance risks becoming less benign than in July.
“In addition, the currency has weakened significantly, which will likely discourage Bank Negara from cutting the OPR for fear of adding to forex (foreign exchange) pressures. In this context, a more viable option would be to cut the SRR,” it added.
Given BNM’s easing bias due to rising growth concerns, Nomura said it is maintaining its forecast of a 25bps cut in OPR in the first quarter of 2017.
“Unlike other major central banks in Asia, BNM is not an inflation targeter and its mandate has included the management of financial stability risks since 2009,” it said.
Nomura’s review of every monetary policy statement and BNM’s annual reports starting from 2004 suggested that the central bank — in a forward-looking manner — looks at the balance of risks around growth and inflation, but also monitors financial stability risks, which are a far more important aspect than what is often factored in by markets.
http://www.theedgemarkets.com/my/article/nomura-sees-bnm-keeping-opr-3
