KUALA LUMPUR (Jan 23): AmBank Group Research there is room for Bank Negara Malaysia to raise rates by 25 basis points to 3.25% in the coming Jan 25 Monetary Policy Committe meeting despite some views that rates will remain unchanged at 3.00% due to the stronger USD/ringgit and the election factor.

In a note today, AmBank group chief economist Anthony Dass said fundamental factors that allow for a rate hike in his view are: (1) a prolonged period of negative interest rates; (2) a pickup in the velocity of money reflecting stronger fundamentals; and (3) healthy liquidity.

“Should there be a hike in January, it will have a temporary positive impact on banks' net interest income (NII).

“Thus, the extent of benefits to earnings will depend on the respective banks’: i) percentage of floating rate loans; and ii) the ratio of domestic to total loans as well as the timing of the rate hike relative to the banks’ FYE,” he said.