RHB Research expects Bank Negara to keep OPR at 3%

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KUALA LUMPUR: RHB Research expects that Bank Negara Malaysia (BNM) will keep the overnight policy interest rate (OPR) unchanged at 3.0 per cent with neutral guidance at its monetary policy committee (MPC) meeting on July 6.


The bank previously indicated that it anticipated a 25 basis points (bps) OPR hike.

In a research note today, RHB Research said the key catalysts for its change were mainly due to limited inflation risks, the central bank’s foreign exchange (FX) intervention measures and BNM’s view on the global economy.

“Although we believe core consumer price index (CPI) inflation will remain sticky in the second half of 2023 (2H 2023), the ringgit against the US dollar will hit 4.75 in the near-term and from a balance of risks perspective could hit around 4.88 in fourth quarter 2023 (4Q 2023), and the nominal effective exchange rate (NEER) is likely to hit new cyclical lows.

“Hence, our reading of the central bank is to hold the OPR steady since its core view is that inflation risks are limited and that the weakness in Malaysia ringgit is mainly due to external factors and not domestic in nature,” it said.

RHB Research said that BNM’s FX intervention measures have picked up steam recently to stabilise the ringgit against the US dollar and a signal that an interest rate defence of the currency is not something the central bank is willing to engage in currently.


It opined that the FX intervention is a stop-gap measure in emerging markets (EM) where the fundamental drivers of the currency are on a weakening path.

“Hence, we believe FX reserves could fall to around US$109 billion within the next three months from the May 31, 2023 level of US$112.7 billion as BNM continues to use the FX intervention policy tool to stabilise the ringgit against the US dollar.

“Ultimately, FX intervention is unlikely to have a sustained durable impact on the path of the ringgit against the US dollar,” it said.

However, RHB Research said the bank maintained its peak OPR forecast of 3.25 per cent in 2023. – Bernama

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