OCBC Bank chief economist Selena Ling expects Bank Negara Malaysia (BNM) to raise the overnight policy rate (OPR) by another 25 basis points (bps) when its monetary policy committee (MPC) meets again on Sept 8.

If this pans out, it will be the third increase this year. In its March MPC meeting, BNM raised the OPR by 25 bps — from 1.75% to 2%. This was followed by another 25 bps increase in the May meeting, bringing the OPR to 2.25%.

However, Ling said, the central bank would likely pause at its November meeting, the last for the year, to assess the balance between inflation and recession risks.

“Going forward, we (may) see more rate hikes. But against the backdrop of rising global interest rates and some domestic inflation pressure, there is a higher chance for a back-to-back rate hike rather than a more drawn-out cycle,” she said.

Ling said such relative monetary policy tightening would occur when the economy is likely to recover well even if the country sees a comparative slowdown in momentum due to global factors.

She said that while Malaysia had started the year on a strong footing, with gross domestic product (GDP) clocking a growth of 5% year-on-year (y-o-y), the potential for headwinds posed by a slowdown in the major economies is likely to present tougher times for the Malaysian economy.

She added that aside from rising domestic demand, higher exports are also essential for the overall economy through a recovery in employment.

Ling expects to see a 5.7% full-year 2022 GDP growth for the Malaysian economy, up from 5.4% previously.