StanChart: BNM To Keep OPR Unchanged At 3.25 Pct

KUALA LUMPUR, July 11 (Bernama) -- Bank Negara Malaysia (BNM) is expected to keep its overnight policy rate unchanged at 3.25 per cent in its coming monetary policy decision on July 13, Standard Chartered (StanChart) said. "Our long-held view had been for the central bank to ease policy rates this year. "However, following the largely neutral tone of the last monetary policy statement, we expect it to maintain the status quo next week and cut rates only in September," StanChart said in a statement Monday. It said the central bank would prefer to communicate changes to its monetary policy stance before sanctioning rate changes. "The case for a rate cut this year remains valid, in our view, despite BNM's largely neutral monetary policy tone. "The outlook for external and domestic growth is poor, while inflation is unlikely to hold back any easing impetus," it said. Private consumption is the key growth support, it said, adding that however, worsening labour-market conditions are likely to depress consumer sentiment. Private consumption eased to 5.3 per cent year-on-year (y-o-y) in the first quarter of 2016 versus the first quarter average of 7.4 per cent in 2011-2015. The labour market is weakening, with the unemployment rate rose to 3.5 per cent in March (the highest since June 2010), while job vacancies are at a multi-year low, StanChart said. It estimated that manufacturing, retail and wholesale trade payrolls rose only 3.1 per cent y-o-y in March (versus an average of 8.3 per cent from 2011-15). Slower property price increases and financial-market volatility may also dampen spending sentiment. StanChart has neutral outlook on Malaysian Government Securities (MGS) due to more global risk aversion and defensive foreign positioning following the Brexit vote. "Rising ringgit volatility is likely to trigger further outflows from BNM bills and short-end MGS. "Local demand for fixed income assets is constructive based on ample cash held by long-term investors and a weaker macroeconomic outlook. "Pressure on the central bank to ease further this year has increased significantly," StanChart said. Overall, limited inflationary pressure and onshore investors’ relatively high cash levels continue to support the local bond market. The first year onshore interest rate swap has fallen significantly since the Brexit result, while the market has started to price in a more dovish policy stance from BNM. "We have a short-term neutral outlook on the ringgit," StanChart added. -- BERNAMA