‘OPR likely to stay unchanged at 3pc’

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THE central bank is likely to leave the borrowing rates unchanged at three per cent today, according to research houses in Malaysia and Singapore.

With the low inflationary pressures, research houses expect the Overnight Policy Rate (OPR) – the benchmark interest rate – to remain unchanged although the risks are on the upside in the second half of the year.

On the back of improving global demand, many were of the opinion that inflation would also rise when the government continues with the subsidy rationalisation programme.

Bank Negara Malaysia’s monetary policy committee, which is holding its first of six meetings in 2013, will review the current rate, which has been in place since May 2011.

The committee, chaired by governor Tan Sri Dr Zeti Akhtar Aziz, holds two sessions for each of its sche- duled meetings.

According to CITI, Malaysia’s stronger economic growth eliminates the possibility of rate cuts while the still low inflation suggests there is no urgency to hike rates immediately. In the third quarter of 2012, the economy grew by 5.2 per cent (year-on-year) from a revised 5.6 per cent in the second quarter.

TA Research’s Patricia Oh expects the policy rate to remain accommodative at least throughout the first half of this year as inflation remains benign.

“Growth will likely to be backed by the rebound in trade during the second half of 2013, which will enable a more sustainable growth ahead.”

HSBC Bank expects the overnight rate to be increased by 50 basis points to 3.5 per cent by end 2013, with the first 25 basis points rate hike expected in the second quarter.

It has argued that the monetary policy needs to move back into the “neutral” gear at 3.5 per cent, otherwise the inflation process will begin to build up.

For 2012, the Consumer Price Index grew by 1.6 per cent.

The Malaysian Institute of Economic Research (MIER) estimated that the CPI would grow by 2.5 per cent in 2013.

Business Times : nation

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