Malaysia's Central Bank Likely To Revise OPR on Stronger Economic Data-RAM Ratings

KUALA LUMPUR, July 18 (Bernama) -- Malaysia's stronger-than-expected growth for exports, manufacturing output, sales, as well as, greater inflationary pressure, could give Bank Negara Malaysia (Malaysia’s Central Bank) more impetus to raise the overnight policy rate (OPR) this year, says RAM Ratings Services Bhd. “We have revised our Gross Domestic Product growth projection to 5.2 per cent for 2017, with an inflation rate of 3.8 per cent; this incorporates a potential 25 basis points hike towards the end of the year,” the rating agency said in a statement. Meanwhile, on bonds, RAM said foreign investors reduced their holdings of Malaysian bonds by 0.6 per cent in June, following two consecutive months of strong net foreign fund inflows. Foreign holdings declined US$303.15 million (RM1.3 billion) after the June rate hike and there were more concrete plans to pare down the US Federal Reserve (Fed) ’s balance sheet, despite inflation remaining below expectation. As a result, the Malaysian ringgit weakened against the US dollar in the second half of June, against expectations of strengthening US Treasury yields and some risk aversion. On a global update, the more hawkish stance of major central banks such as the Fed and the European Central Bank would likely be key to investors in the second half of 2017 in terms of portfolio allocations. “That said, some inertia in tightening monetary policy may be apparent after years of “easy money”. '’This uncertainty over the timing of policy changes may lead to continued market volatility,” it added. -- BERNAMA