PETALING JAYA: Malaysia's Overnight Policy Rate (OPR) may stay at its current level even if the US Federal Reserve (Fed) decides to cut rates next year to take some steam out of the economy and curb inflation.
Socio-Economic Research Centre executive director Lee Heng Guie said Malaysia would not follow in tandem with the US if it reduces benchmark rates given the gap between the ringgit and the dollar is still wide.
"An increase in the OPR could put more pressure on small and medium enterprises (SMEs), and households will also be impacted.
"We foresee that Bank Negara Malaysia may keep OPR steady for now, unless there is an economic slowdown next year that requires a cut in OPR.
"However, even if the Fed decides to lower the rate next year, Malaysia is not likely to follow in tandem because of the gap between the ringgit and the dollar which is still wide," Lee said at the CEO Series 2023 - Economy and Business Forum here today.
Lee expects core inflation to range between 2.8 per cent and 3.5 per cent in 2024.
On the global front, Lee highlighted the risk of a US recession presents uncertainty in the conditions for Malaysia to operate next year.
Other risks to the global economy included slowdown in China as it faces troubles in its property market as well as uncertainty in the movement of interest rate.
He noted that the US rates have increased but the focus has been shifted to the looming rate cuts, mainly when and by how much.
Lee expects the Fed to start lowering rates in the second quarter of 2024 (Q2 2024) to Q3 2024.
Meanwhile, Lee said 2024 will be the year for investors, businesses and consumers to track the delivery of policy reforms and policy settings promised by the unity government this year.
After one year in power, Lee said the government led by Prime Minister Datuk Seri Anwar Ibrahim had a year of "transition" this year as it outlined its directions through policy frameworks such as the Madani economic framework, New Industrial Master Plan 2023, National Energy Transition Roadmap and 12th Malaysia Plan Mid-Term Review.
"Next year is no more honeymoon for the government. Next year is the year for us to monitor and track the delivery of their promised reforms and policy setting made this year," he said.
Lee noted that investors, businesses and consumers are not expecting a perfect delivery of the promised reforms.
"It is important for the government to set the tone to reform for a future proof Malaysia ahead of the next general election in 2027," Lee said.
He also forecast the economy to grow by 4.5 per cent next year.