“Given the adjustment of the OPR to pre-pandemic levels, we believe that the OPR will hold steady at 3% through 2024.

“Bank Negara Malaysia (BNM) underscores that the existing OPR level aligns with a supportive monetary policy stance for the economy, consistent with the current evaluation of inflation and growth prospects,” the research house said in a note.

It noted that core inflation, “a metric that excludes volatile and administered price elements,” sustained its steadfastness, registering a 1.7% year-on-year increase.

“BNM’s forecast for this year anticipates headline inflation, ranging between 2% and 3.5%, factoring in potential pressures stemming from fuel subsidy rationalisation.

“This projection underscores the significance of both domestic and external dynamics in shaping inflationary trends,” it added.

Public IB noted that domestically, adjustments in essential item prices, particularly within the energy and food sectors, “could exert upward pressure on inflation, especially in the event of modifications to blanket fuel subsidies.”

“Additionally, exchange rate fluctuations are highlighted as a critical factor, particularly for import-sensitive sectors like food and transportation.

“However, amidst these inflationary forces, subdued global growth prospects offer a counterbalancing effect, potentially alleviating inflationary pressures by exerting a downward force on commodity prices,” it said.

Public IB said core inflation is envisaged to average between 2% and 3% in 2024 (3% in 2023).

Nevertheless, it said the short-term ramifications of fuel subsidy rationalisation on inflation and growth are contingent upon the magnitude and timing of price adjustments.

“The implementation of targeted assistance alongside subsidy rationalisation will play a crucial role in mitigating the impact on vulnerable segments during the transition period,” it said.