Economists who spoke to FMT Business cited three factors that, they said, would keep the OPR unchanged.

Even after the surge, crude prices are still lower today than they were at this time last year, the inflation rate has come down and growth has moderated.

An announcement on the OPR is scheduled to be made today, at the end of a two-day monetary policy committee meeting that began yesterday.

Geoffrey Williams of the Malaysia University of Science and Technology said the rise in US Treasury yields led by the spike in oil prices was also unlikely to put pressure on BNM to raise the OPR.

“I don’t think it will have an effect given that real interest rates in Malaysia are already positive,” he said.

At the time of writing (Sept 6), the Brent crude price was at US$89.44 (RM400.42) compared with US$91.97 ( RM413.08) at this time last year. Year-to-date, it was up by 13.14% or US$10.39 (RM46.52).

Williams and Bank Muamalat chief economist Afzanizam Rashid also share the view that a slowdown in inflation and moderation in growth would keep BNM from raising the OPR.

Afzanizam pointed out that raising the OPR now would hamper economic growth and consumer spending.

“Therefore, having a stable OPR should help to promote spending and investment, making it the main engine of growth for the domestic economy,” he said.

Malaysia’s inflation rate moderated further to 2% in July 2023 – a two-year low – from as high as 4.7% in August last year.

This, Afzanizam said, has caused the real interest rate to turn positive for three consecutive months. It was at 0.6% in July.

However, the Q2 2023 gross domestic product (GDP) growth dropped to 2.9% from 5.6% in the previous quarter.

“Therefore, the monetary policy is no longer too accommodative as borrowings have gradually become expensive,” Afzanizam said.

BNM last raised the OPR in May by 25 basis points to 3%. The OPR has gone up by 125 basis points from 1.75% since March last year.

All 27 economists who were polled by Reuters from Aug 29 to Sept 4 agreed that BNM would maintain the OPR at 3% for now.

Of the 18 who shared their views on which direction the rate would go until the end of next year, 15 agreed that the central bank would hold it at the current level.

End of rate hike cycle?

Like BNM, the US Federal Reserve (Fed) is also expected to maintain its interest rates at current levels, at least for now.

Last Friday’s US jobs report indicated that the country’s labour market is cooling again, allowing room for the Fed to hold its interest rates steady for the time being.

The data showed that unemployment in the US edged up to 3.8% last month, higher than consensus expectations of 3.5%.

Meanwhile, there were 187,000 new non-farm jobs in August – higher than the predicted 170,000 – but still lower than the 200,000 mark for the third consecutive month.

The 0.2% monthly wage growth was also lower than economists’ projections.

Both the jobs and wage growth data, usually taken as proxies for inflation level, indicate that prices may come down soon.

The new data arrived just three weeks prior to the Fed’s next interest rate announcement on Sept 20.

Meanwhile, Australia’s central bank has also decided to maintain interest rates for a third straight month at 4.1%.

The Reserve Bank of Australia said that recent data showed that the country’s inflation is receding, and is set to reach the 2%-3% target range by late 2025.

Canada similarly kept its interest rate unchanged at 5% yesterday.