CIMB Research expects Bank Negara to raise OPR by 25 basis points in 1Q18

CIMB Research expects Bank Negara to raise OPR by 25 basis points in 1Q18
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KUALA LUMPUR (Dec 21): CIMB IB Research expects Malaysia’s headline inflation to moderate in 2018 (2.9% versus 3.8% in 2017), as retail fuel prices should remain broadly stable in the year ahead compared with a 22.8% jump in 11M17.

In an economics note Dec 20, the research house said Bank Negara Malaysia (BNM) is poised to raise the Overnight Policy Rate (OPR) by 25 basis points (bp) in 1Q18, potentially as early as in its 24-25 Jan meeting, in response to the strong expansion in Malaysia’s economy and to head off risks of demand-driven price pressures.

“We reiterate our end-2018 OPR forecast of 3.25%,” it said.

CIMB Research said headline inflation in November slipped to 3.4% year-on-year (y-o-y) (3.7% y-o-y in October) due to a moderation in food, transport and housing inflation.

It said other incoming sources of y-o-y inflation include retail fuel in December, air transport in December due to higher passenger service charges, and higher gas tariffs during 1 January-30 June.