● Hawkish tilt. The Federal Open Market Committee (FOMC) intensified their battle against the hottest inflation in four decades by shifting to an earlier end of their asset-buying programme, signalling the tilt to a faster pace in raising interest rates in 2022.
● Double up. The Fed said it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to USD30.0b a month, putting it on track to conclude the program in early 2022, rather than mid-year as initially planned.
● Rates unchanged. As widely expected, the FOMC’s 18 members unanimously decided to keep the federal funds target rate range at 0.00%- 0.25%. With inflation staying at elevated levels, the more rapid taper is expected to give the Fed more flexibility to raise rates at an earlier date.
● Dot plots: The Fed expectations turn decidedly more hawkish as the dot-plot showed that all the 18 FOMC members now expect at least one rate hike will take place in 2022. At the same time, 12 of the policymakers see at least three quarter-point hikes during the year. Two of those surveyed think four increases will be necessary.
● Inflation alarm. The Fed has ratcheted up its rate expectations throughout the year, amid ongoing signs that inflation has not been as “transitory” as policymakers once hoped. Since the FOMC meeting in September, inflation figures have continued to show accelerating price increases, with recent figures pointing to decades-high levels: Producer prices jumped 9.6% YoY for November, the highest reading since the government started tracking the number in 2010, while consumer prices rose 6.8% in November, highest since 1982.
● BNM policy outlook. In the immediate term, despite a positive economic outlook amid Malaysia’s improving COVID- 19 situation and ongoing vaccination efforts, we see a low likelihood of any changes to Bank Negara Malaysia’s (BNM) monetary policy stance. The threat of new Coronavirus mutations and its impact on the global economy would continue to pressure governments and central banks to remain vigilant. Hence, we believe that the central bank is expected to keep its overnight policy rate unchanged at 1.75% at least till the first half of 2022. Nevertheless, on the expectation that the economic recovery momentum would pick up along with the persistently elevated inflationary trend, we might see BNM policy stance gradually move towards tightening starting from 2H22 onwards.
Source: Kenanga Research - 16 Dec 2021
Created by kiasutrader | Aug 26, 2024
Created by kiasutrader | Aug 26, 2024