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KUALA LUMPUR (Sept. 10): Economists appear to be divided on whether Bank Negara Malaysia (BNM) will cut rates again at its Monetary Policy Committee (MPC) meeting later today, with several polls indicating a close call between those who expect another cut of 25 basis points (bp) and those who see the Central Bank taking a breather after four consecutive cuts this year.
According to Bloomberg, a total of 12 economists see no reason for a rate cut at the September meeting, while nine economists are betting on a cut. Meanwhile, a Reuters poll found that six economists expect rates to be maintained, while seven expect a cut. Of those polled by Reuters and Bloomberg who expect another 25 basis point cut, a handful believe an additional 25 basis point cut is possible in November.
The case of a court
- There is still room for cuts given the low inflation rate
- Growth rates are expected to remain negative in the short term
- Another wave of COVID-19 infections possible, negatively impacting growth
ING Bank Senior Economist, Asia, Prakash Sakpal
There is still room for relaxation, as BNM’s 1.75% policy rate, coupled with negative inflation, allows its easing cycle to continue. Negative inflation means that the real political interest rate is one of the highest in Asia, which is not a good backdrop for economic recovery. He also said that another 25 basis point cut at the November meeting would not hurt.
Irvin Seah, Senior Economist at DBS
A final 25 basis point cut by BNM is possible to better align risks for both inflation and growth. While BNM had cut the OPR by a total of 125 basis points so far this year, with negative growth and the arduous road to recovery ahead, there is room for further monetary easing to support growth in the coming months.
Felicia Ling, Economist at Hong Leong Investment Bank
The research house maintained its expectation of another 25 basis point cut in the OPR, following the announcement of a lowered forecast for Malaysia’s GDP for 2020 of a contraction of between 3.5% and 5.5% by the BNM, as the Bank Central cited the possibility of downside risks due to persistent weakness. on global growth and the potential for COVID-19 to further spread.
Dr. Mohd Afzanizam Abdul Rashid, Chief Economist at Bank Islam
The Central Bank certainly has the ability to lower the OPR further, he said, given low inflation, adding that the negative output gap, the difference between real and potential GDP, will likely persist in the short term, suggesting that a higher cut is justifiable.
CIMB-CGS Economist Michelle Chia
The economist has revised her OPR forecast for the end of 2020 from 1.75% to 1.5%, which indicates her expectation of another 25 basis point cut, as she expects the Central Bank to deploy more monetary policy space to cushion downside risks.
Dr. Rosnani Rasul, Economist at the Public Investment Bank
Not only is a further reduction of the OPR possible, but also the legal reserve requirement (SRR), in the event of a prolonged pandemic. Similarly, he believes there is room for another cut, given benign inflation.
The case against another court
- BNM has room to pause cut rates
- There are already signs of economic recovery
- More cuts may have limited impact and reduce future policy space
Chief Economist of Standard Chartered, ASEAN and South Asia, Edward Lee
The Central Bank has room to take a wait-and-see stance, he said, while taking stock and assessing Malaysia’s pace of recovery in the second half of 2020. He added that global economies have reopened, with data indicating a clear choice. -up in activity.
Any additional cuts may have only marginal impact and would reduce future political space, given that some of the pandemic restrictions are still in place, Lee said. However, it does not rule out new cuts in case of repeated infections that threaten the recovery of economic activities.
Group Managing Director RHB Datuk Khairussaleh Ramli
While the bank expects GDP to contract in the third quarter, it will be at a much lower rate. He said RHB also expects slightly positive GDP growth in the fourth quarter.
The bank has also seen some “green shoots” in certain segments of its business in terms of loan applications, so Khairussaleh believes that “perhaps there is no reason to reduce the OPR for now.”
Head of Economic Research at Kenanga Investment Bank Wan Suhaimie Mohd Saidie
He said the OPR is likely to remain at 1.75% at today’s meeting, based on the optimistic tone of the Central Bank on its growth recovery outlook, noting that BNM had stated that the economic recovery had already begun. in early May when the Movement Control Order (MCO) was relaxed. That said, he said that the Central Bank still has room for further monetary easing if the pace of recovery weakens.
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