OPR to remain unchanged until 2024: MIDF Research

KUALA LUMPUR: Malaysia's overnight policy rate (OPR) will remain unchanged at 3.00 per cent until 2024, according to MIDF Research.

The focus of Bank Negara Malaysia's monetary policy setting is to ensure Malaysia's economy maintain sustainable growth momentum, the firm said.

"Given the OPR is already at the normal rate supportive of sustained growth in Malaysia's economy, we expect Bank Negara to continue to maintain the OPR at 3.00 per cent next year," it said in a note.

Bank Negara's decision to keep the OPR at 3.00 per cent, at its final monetary policy meeting of 2023 on Thursday, is in line with MIDF Research and market expectations.

In the monetary policy statement, Bank Negara highlighted that the global economy remains expanding as countries reported increased domestic demand on the back of a strong labour market.

On the price developments, Bank Negara indicated easing cost pressures contributed to the moderation in both headline and core inflation. 

"The central bank anticipates inflation will be modest next year, although the price outlook will be influenced by the government's policy changes with regards to subsidies and price controls," it said.

On the ringgit, MIDF Research said the currency stays on a depreciation path as the US Federal Reserve keeps on delaying its interest rate pause.

Although the firm has revised its forecast and expects the ringgit to average RM4.48 per US dollar and end the year at RM4.30, there is a downside risk to its prediction.

"Fundamentally, the ringgit is in a good position to strengthen as the domestic economy stays on upbeat momentum and the ringgit stands to gain from the elevated global commodity prices and sustained trade surplus. 

"We foresee the ringgit to appreciate in the latter part of the quarter when the recent safe-haven demand for dollars subsides and the risk appetite improves, which will lead to more funds flowing back to EM economies," it added.

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