Malaysia's Central Bank Keeps Overnight Policy Rate Unchanged

The Bank Negara Malaysia provided a dovish surprise, keeping its Overnight Policy Rate unchanged at 2.75%. All but one economist surveyed by Bloomberg called for a 25bp hike, with the lone dissenter correctly predicting the actual outcome.

• The BNM said that domestic "growth for 2022 is expected to exceed the earlier projected range of 6.5% - 7.0%" but "in 2023 is expected to moderate amid a slower global economy."
• "Over the course of 2023, headline and core inflation are expected to moderate but remain at elevated levels amid lingering demand and cost pressures."
• "Today's decision allows the MPC to assess the impact of the cumulative past OPR adjustments, given the lag effects of monetary policy on the economy."
• Malaysia's central bank started tightening monetary policy in May, raising the OPR by a cumulative 100bp since then.
• Spot USD/MYR shot higher in reaction to the BNM's decision but failed to re-test its intraday highs. It has now trimmed gains and trades +48 pips at MYR4.3205.
• The recent death cross formation supports USD/MYR bears, drawing attention to the 61.8% retracement of the 2021 - 2022 rally at MYR4.2837.