MIDF Research expects another 25 bps rate hike in Mar-23

PETALING JAYA: MIDF Research expects 25 basis points (bps) rate hike in Mar-23 by Bank Negara Malaysia (BNM) as well as the normalisation of the statutory reserve requirement (SRR).

MIDF Research said the current focus of BNM’s monetary policy setting is to ensure a sustainable growth momentum of Malaysia’s economy.

“With the rising core inflation trend and stronger-than-expected domestic demand, we expect the central bank to restore its monetary bullets to pre-pandemic levels to 3.00% by Mar-23.

In addition, the central bank is expected to normalize the SRR from 2.00% to 3.00% this year.

The SRR rate was reduced to 2.00% since March 20. However, the decision will be subjected to the stability of economic growth, the pace of price increases and a further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand.

“From a medium-term perspective, the policy rate normalization is needed to avert risks that could destabilize the future economic outlook such as persistently high inflation and a further rise in household indebtedness,” it said.