Outlook On Overnight Policy Rate(OPR) Unlikely To Change

Bank Negara’s monetary policy committee holds its sixth meeting of the year today(25 August 2009). There are another two more Meetings until the end of the year.

The following 21 economists surveyed in a Business Times poll:

• Action Economics,Affin Investment Bank, AmResearch, Bank Islam, CIMB Investment Bank, Citi, Credit Suisse, DBS Bank, HSBC Bank, Inter-Pacific Research, JPMorgan Chase Bank, Kenanga Investment Bank, Kuwait Finance House, Maybank Investment Bank, MIDF Research, OCBC Bank, OSK Investment Bank, RHB Research, SCB, TA Research and UOB Bank

have the same outlook  that  the Overnight Policy Rate (OPR) would remain at 2 % until the year-end. They felt that BANK Negara Malaysia is unlikely to change the key interest rate for this month and the rest of the year as it focuses its attention on economic growth. For those who are unaware,the central bank has cut the OPR by a total of 125 basis points, or 1.25 per cent, between November last year and February this year. The present OPR rate is 2%.

More views from economists that OPR should not change:

• Standard Chartered Bank economist Alvin Liew -OPR would stay unchanged as inflation was not a concern for the rest of the year while economic recovery was uncertain. Expect monetary policy to take a back seat for the rest of 2009 as fiscal measures exert a more visible impact on the economy,
• OCBC Bank economist Selena Ling felt that Bank Negara was more likely to remain cautious and wary about raising rates until gross domestic product figures reverted to positive territory.
• Citi economist Kit Wei Zheng expects the first OPR increase in the fourth quarter of next year, after the US Federal Reserve makes its first increase in the second quarter of next year.

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