PETALING JAYA: A rate cut is likely to take place during the July 9 Monetary Policy Meeting (MPC) meeting rather than the May 7 meeting by 25 basis points after taking into account of some recent anecdotal evidences of the macro figures that revealed a weak trend, AmBank Research projected.
However, the research house pointed out that the tone of BNM appears to be “cautious”. The central bank acknowledged that “downside risks from unresolved trade tensions, heightened uncertainties in the global and domestic environment, and prolonged weakness in the commodity-related sectors could further weigh on the domestic growth though the baseline forecast appears to remain on a steady growth path”.
“With BNM having acknowledged the downside risks in the economic and financial environment, and the need to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation, it supports our view for a rate cut to most likely take place during the July 9 MPC meeting,“ AmBank Research said.
PublicInvest Research, meanwhile, opined that the OPR may remain steady unless there is a change in growth dynamics.
“We think 4% and below or 6% and above in growth prospects could be the immediate trigger points for a change in the policy rate. The central bank may also review the policy rate should there be a rise in financial imbalance risks but that prospects appear muted at this juncture due to the limited upside in equity market and housing prices.”
Added with small prospect of demand-driven inflation, OPR, is therefore, forecast to remain unchanged in 2019, PublicInvest said.
Kenanga Research said BNM has toned down its inflation expectation in 2019 even further to “stable”, from “moderately higher” previously and “inflation is projected to increase” end of last year.
Coupled with a fair warning that the global economy is slowing and a dovish US Fed, this may provide justification apart from creating ample room for a rate cut.
“At this juncture, we do not see the need for BNM to do so lest it triggers a bigger capital outflow and unnecessarily weakens the ringgit. Barring a major external shock, we expect the OPR to remain at 3.25% this year,“ said Kenanga.
PublicInvest Research expects the ringgit volatility to improve in 2019, soothed by the US decision to slow down its policy hikes, with a likely end of the trade war also helping.
Source: The Sun Daily