money

Citing inflation spike, Fitch outfit predicts OPR to rise to 3.5pc by year end

Last month, BNM raised its key interest rate for the first time since July 2014, tapping the brakes at a time when growth has been robust and inflation creeping up. — Picture by Yusof Mat IsaLast month, BNM raised its key interest rate for the first time since July 2014, tapping the brakes at a time when growth has been robust and inflation creeping up. — Picture by Yusof Mat IsaKUALA LUMPUR, Feb 13 — Analyst firm BMI Research said today it expects Bank Negara Malaysia (BNM) to revise its Overnight Policy Rate (OPR) by 25 basis points to 3.5 per cent by the end of the year.

The Fitch Group research house said its prediction is above consensus which suggested a rate of 3.3 per cent instead, due to the expectation that inflation will spike in the following quarters.

“The Malaysian ringgit remains on an appreciatory path while the growth outlook is still strong,” it said in a statement.

“We expect inflation to remain elevated over the coming quarters as oil prices trend higher and as the effects of increased handouts from the 2018 budget start to take effect.

The firm said BNM appears to be slightly hawkish, and therefore it expected the central bank to hike the interest rate to keep inflation under control.

Last month, BNM raised its key interest rate for the first time since July 2014, tapping the brakes at a time when growth has been robust and inflation creeping up.

It had raised its OPR by 25 basis points to 3.25 per cent, saying its monetary policy committee “decided to normalise the degree of monetary accommodation” as the economy remains firmly on a steady growth path.

BNM had previously announced that the consumer price index rose 3.5 per cent year-on-year in December, on higher costs of transport, food and non-alcoholic beverages.

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