Will Bank Negara Malaysia hold the OPR at 2.50% in May?

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Bank Negara Malaysia Expected to Maintain OPR at 2.50% in May

OCBC Bank anticipates that Bank Negara Malaysia (BNM) will hold the overnight policy rate (OPR) at 2.50 per cent during its Monetary Policy Committee meeting scheduled for May 5. This projection is based on the assessment that the central bank is not yet prepared to implement a rate cut, despite the potential for further easing later in the year.
Rationale for Maintaining the OPR

Economist Wellian Wiranto from OCBC Bank suggests that maintaining the current OPR is prudent due to several factors. A significant portion of borrowers are not actively servicing their loans, which would limit the transmission effect of lower interest rates and provide only a marginal boost to overall sentiment. Furthermore, considerations regarding potential impacts on the ringgit's value and the imperative to safeguard the financial health of the banking sector, which has absorbed substantial moratorium-related costs, support the decision to keep the OPR unchanged.
Anticipated Future Rate Adjustments

While the immediate outlook points to a hold, OCBC Bank forecasts a potential reduction in the OPR later in the year. Wiranto anticipates a further rate cut of 50 basis points sometime within the current year, indicating a possibility of monetary easing to stimulate the economy. This forward-looking perspective suggests that the current OPR hold is a temporary measure rather than a definitive stance against future rate adjustments.
Alternative Monetary Policy Tools

In addition to managing the OPR, OCBC Bank has proposed that BNM consider employing other tools to support the economy. Specifically, a reduction in the statutory reserve requirement (SRR) from its current level of 2.0 per cent has been suggested as an additional measure. Such an adjustment, even if primarily aimed at managing banking sector liquidity, could offer relief to financial institutions and contribute to improved market sentiment.

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Will Bank Negara Malaysia hold the OPR at 2.50% in May?

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