An Expected OPR Hike

What’s going on here?
Bank Negara (BNM) has raised the overnight policy rate (OPR)
for the third consecutive time by 25 basis points to 2.5%, in line
with expectations for further normalisation of monetary policy
as the country’s economic growth and inflation gain momentum.

What does this mean?
With positive growth prospects for the country’s economy remaining
intact, the Monetary Policy Committee (MPC) stated that the current
OPR level remains accommodative and supportive of economic
growth. The labour market conditions and income prospects remain
positive and BNM projected the headline inflation to peak in 3Q22
before moderating. BNM said the MPC is not on any pre-set course
and will continue to assess evolving conditions and their implications
on the overall outlook to domestic inflation and growth.

Why should I care?
With the rising core inflation trend and stronger-than-expected
domestic demand, MIDF predicted Bank Negara would likely bring
the OPR to 2.75% in the final MPC meeting in November, while
economists anticipated the OPR to reach the pre-pandemic level
of 3% by 1H23.

From Hartamas Notes For The Week