However, it said the decision would be subject 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 post-pandemic policy rate normalisation provides room for BNM to better manage risks that could destabilise the future economic outlook.
“These risks include persistently high inflation and a further rise in household indebtedness,” it said in a research note.
On the ringgit, due to the persistent inflation environment in the US, MIDF Amanah said it foresees an elevated demand for the US dollar at least until there is a clearer outlook on its interest rate direction.
“We remain cautious of downside risks that might hinder the ringgit’s rally in 2024, such as delays in the US Federal Reserve’s (Fed) interest rate easing and further geopolitical tensions between China and the US, as well as in the Middle East,” said the investment bank.
Meanwhile, RHB Investment Bank Bhd (RHB IB) said in its research note that it maintained its view for the OPR to remain unchanged at 3% for 2024.
It said policymakers might hold the OPR rate while assessing the lagged impact of fiscal policy changes on the overall inflationary trajectory and economic momentum.
“In our view, three key factors will drive the OPR behaviour, namely Malaysia’s economic momentum, whereby we expect growth to expand by 4.6% in 2024 (against 2023’s 3.7%).
“Secondly, the inflation trajectory, which we think headline Consumer Price Index (CPI) will expand by 2.6% in 2024 (from 2023’s 2.5%), and thirdly, to a smaller extent, on how global rates may behave in the foreseeable future,” it said.
On the ringgit, it expected the ringgit-US dollar pair to consolidate towards RM4.65 by end-2024, following the anticipated Federal Funds Rates (FFR) reduction by December and improvement in the macroeconomic backdrop.
In addition, CIMB Investment Bank Bhd said that the decision by the BNM Monetary Policy Committee (MPC) to keep the OPR at 3% yesterday was no surprise.
The investment bank stated that the monetary policy stance remains neutral as the economic recovery gains momentum.
“Additionally, the inflation outlook remains anchored within the official target, with a manageable pass-through effect from the diesel subsidy rationalisation.
“As such, we expect BNM to keep the OPR at the current level until year-end,” it said.