KUALA LUMPUR (Feb 23): RHB Investment Bank (RHB IB) said Malaysia’s leading gross domestic product (GDP) index has shown evidence of a marked recovery for the first quarter (1Q) of 2024.

In a note, the bank said Malaysia’s exports expanded at a robust rate of 8.7% year-on-year (y-o-y) in January 2024, proving that the slowdown in December’s numbers was probably a blip.

In the meantime, RHB IB said the latest United States (US) Federal Open Market Committee minutes reinforced its view for the US Federal Fund Rates (FFR) to stay higher for longer at its current peak of 5.25% to 5.50%.

“The minutes suggest US Federal Reserve officials’ concerns over premature rate cuts, with policymakers suggesting that more evidence is needed for inflation to be firmly on its path towards the 2.0% target.

“Secondly, economic confidence remains high, with only a couple of officials citing risks to growth, should rates stay high; and there remains a great deal of uncertainty on when [the] FFR will finally see its first cut,” it said.

RHB IB opined that the minutes will reinforce market expectations that US rates will likely stay high, at least in the first half of 2024 (1H2024).

“As such, we stand firm on our base case for only two FFR cuts in 2H2024, likely to be seen only in September (-25 basis points (bps)) and December (-25bps) 2024.

“We view that current market expectations of three rate cuts by the end of 2024 remain mispriced, and it will likely gravitate toward our view of only two cuts in 2H2024,” it added.

https://www.theedgemarkets.com/node/702132