Key interest rate to stay unchanged?

PETALING JAYA: Bank Negara is expected to hold the benchmark interest rate steady when policymakers meet tomorrow as the surge in oil prices again raises concerns over inflationary pressure.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/8/business/10872820&sec=business
Published: March 08, 2012

CIMB Investment Bank Bhd economic research head Lee Heng Guie said the central bank would keep the overnight policy rate (OPR) on hold as they again weigh price increases with growth concerns after crude oil prices jumped in the past six months.

The OPR has remained unchanged at 3% since last May after rates were raised four times from 2% in March 2010.

The median estimate in a Bloomberg survey of economists showed no change in the OPR regime.

“Policymakers are now caught in a dilemma as they've to weigh upside risks to inflation and downside risks to growth after easing rates earlier on,” Lee told StarBiz.

He said although inflation had come off in most of the Asean region, policymakers would have to assess growth momentum and then make decisions on whether “to rewind what they unwound earlier on or to keep rates steady”.

For Malaysia, Lee said policymakers would have to keep in mind the subsidy policy on fuel. “While subsidy rationalisation will not be in the picture as the general election draws closer, inflation expectations will go up when the subsidies are cut,” he added.

Meanwhile Citigroup Inc senior economist Kit Wei Zheng said in a report dated Feb 24 that unless there were signs of a much deeper recession which would lead to large-scale loss of jobs, “we think Bank Negara is inclined to stand pat in 2012”.

Societe Generale SA forex strategist Chong Wee Khoon said in another report that as Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had expressed strong confidence in domestic demand supporting the economy, the monetary policy committee meeting tomorrow should be “a non-event”.

He said that despite the central bank's non-dovish tone, “global growth risks remain skewed to the downside and we think it is too early to write off possible easing measures in the coming 12 months”.

A Bloomberg report noted that South Korea, New Zealand and Indonesia were among countries expected to hold rates steady in the Asia-Pacific region.