KUALA LUMPUR (Jan 20): OCBC Bank sees further easing in the overnight policy rate (OPR) by Bank Negara Malaysia (BNM), likely in the second quarter of 2021 (2Q21), when economic prints start to shift less decisively upward than anticipated.
Its economist Wellian Wiranto said an economic recovery is coming, in large part driven by the start of vaccination efforts, especially in major economies.
“But we see the ongoing challenges of Covid-19 case resurgence hurting things more — even if a lot less than in 2020 — and we have probably attached a lower probability of a smooth vaccine rollout,” he said in a note today.
The central bank has maintained the OPR at 1.75%, following the Monetary Policy Committee (MPC) meeting today, as it sees continued recovery in the global economy, although downside risks remain amid uncertainties surrounding the Covid-19 pandemic.
Wiranto said against a backdrop of an economic outlook that remained rather upbeat, despite the changing circumstances, it does not look like BNM was in a hurry to cut rate just yet.
“We are less assured than the central bank may be, in how growth rate can pick up all that effortlessly in the second quarter, on the back of mass vaccination efforts,” he said.
The apparent baseline assumption of a smooth roll-out of vaccines both globally and domestically — and how this might naturally lead to a steady growth uptick, may come to be tested, he added.
“Such downside risks are well-flagged in the statement, and indeed, the MPC is keen to leave itself some wiggle room for action, should the situation turn awry,” said Wiranto.