Bank Negara may maintain key rate at 3% until year-end

KUALA LUMPUR: Bank Negara is expected to leave the overnight policy rate (OPR) unchanged, at least until the end of the year, says HSBC Global Research. The statement by the central bank on Thursday accompanying its announcement to leave the OPR unchanged at 3.0% signalled a further freeze in the policy rate, at least until year-end, said HSBC Global Research Asean economist Su Sian Lim.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/7/7/business/11621251&sec=business
Published: July 07, 2012

“Bank Negara did describe global uncertainties as considerable', but on the other hand there was recognition that financial market pressures had receded'. On balance, we think this makes for a neutral policy bias going forward,” she said in a statement.

“When economic conditions do allow, its next policy move we think likely early next year will be up, given very robust domestic demand conditions, and still-elevated house prices and debt levels,” she added.

She noted that with house prices and household debt at elevated levels, and domestic demand still clearly very robust, the central bank will remain cautious about loosening monetary policy.

Domestic demand is providing a powerful counter to the external slowdown and unless one or both of these take an unexpected turn for the worse, the more prudent policy option for Bank Negara would be to stand pat, she said.

“There is no reason to be pessimistic on the domestic outlook for now, with a general election around the corner, there are still generous subsidies and handouts to come.”

Meanwhile, the programmes that are driving investment growth are long-term, namely the Government and Economic Transformation Programmes (GTP and ETP, respectively).

The former is part of the government's plan to transform Malaysia into a high-income country by 2020, and among other things identified the improvement of basic rural infrastructure and urban public transport as key priority areas.

The ETP identified 12 key economic sectors as long-term growth drivers, including oil and gas, tourism, electronics and the development of the Greater Kuala Lumpur/Klang Valley area. Bernama