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BNM expected to cut OPR to new low of 1.5%

January 16th, 2021 Leave a comment

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DBS Group Research is predicting Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) by another 25 basis points (bps), which would bring the interest rate to a new low of 1.5%, in the forthcoming monetary policy meeting scheduled for Jan 20 next week.

The move is expected to be taken in response to the potential impact on the economy of the recent announcement of the state of emergency and the reimplementation of the movement control order (MCO), according to DBS economist Irvin Seah in a note today.

“We reckon that the latest set of measures will likely trim overall GDP (gross domestic product) growth in 2021 by about 0.8 percentage point to 5.2%, down from our current forecast of 6%. Domestic consumption will be most affected and remain a key drag on growth,” said Seah.

Last year, the local central bank made four OPR cuts and slashed a total of 125bps to its lowest-ever level of 1.75%.

The government recently announced the national state of emergency until Aug 1 and reinstated the MCO for two weeks in a bid to contain the worsening Covid-19 situation, of which the total number of infections exceeded 145,000, from about 11,000 in early October, while daily new cases surpassed the 3,000 mark over the past few days.

The MCO entails tighter restrictions on social and work mobility across Penang, Selangor, Melaka, Johor and Sabah, as well as the federal territories of Kuala Lumpur, Putrajaya and Labuan, which account for about two-thirds of the country’s GDP, and chances are high that it will be extended, judging from the rapid spread of the Covid-19 pandemic, said Seah.

“Though Bank Negara would be easing against a backdrop of US curve steepening, strong global reflation optimism and Asian central banks generally on hold, we do not expect an adverse reaction from financial markets, especially as real rates remain relatively high,” said Seah.

He added that foreign inflows into Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) also stayed robust in recent months, and should continue to be supported by buoyant global risk sentiments and higher energy prices.

Source: EdgeProp.my

 

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  1. Internation
    January 17th, 2021 at 09:28 | #1

    With the QEs here and QEs there, so much moneys are chasing assets the world over, property prices tend to going beyond even in Malaysia(later). Hyperinflation is imminently “changing the world” we live. But then, with the concerted/conspired trend still intact in the nearest future, we have no other alternative but to live in a “K-graph” situation for prolong period.
    Just put aside the (undue?) worry, can we simply presume property prices in Malaysia will soon “breakthrough” despite the doldrum now comparatively ?

  2. tuakong
    January 17th, 2021 at 11:19 | #2

    @Internation
    No breakthrough for Penang definitely. DAP has screwed up the property market very big time by increasing plot ratio so drastically (resulting in huge supply) that real estate as an investment asset no longer make sense in PG. Even current property owners who are owner occupiers would suffer as that one big single asset they own would not have any meaningful value appreciation over many years.

  3. Orange
    January 18th, 2021 at 09:01 | #3

    @tuakong

    Housing is basic needs for all people. It is never mean to benefit of house owners for capital gain. Do you want Penang to be Hong Kong where a lot people can’t afford for basic room renting.

  4. birdman
    January 18th, 2021 at 11:09 | #4

    @Orange
    (1) “Housing is basic needs for all people” — agreed
    (2) “It is never mean to benefit of house owners for capital gain” — agreed, with a caveat. In Spore, a house can actually be part of retirement savings, which can be sold and downsized to a smaller (cheaper) unit after retirement, and saving the balance as retirement fund.
    (3) “Do you want Penang to be Hong Kong where a lot people can’t afford for basic room renting” — I do not want that, BUT, you can have the best of both worlds (affordable housing + invest-able housing) if our state gov has proper strategy and planning, instead of being lead by developers around by the nose. :)

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