MNI Bank Negara Malaysia Preview - November 2022: Measured & Gradual

Executive Summary

• Although Bank Negara Malaysia was in a better starting position than many of its regional counterparts, it will likely raise the Overnight Policy Rate by a further 25bp this week. Historically elevated core inflation, intensifying peer pressure, the need to rebuild monetary policy buffers and a lengthy hiatus ahead of the next rate review should be enough to budge policymakers towards a standard-sized rate hike.
• On the surface, the latest CPI outturn may have been reassuring. Headline inflation eased more than expected to +4.5% Y/Y, failing to challenge prior cyclical highs. Still, core inflation printed at +4.0% Y/Y, rising to the highest point since at least 2015. Domestic price pressures support the case for continued monetary tightening after the BNM raised its key policy rate by 25bp at each of the last three meetings.
• The fact that this will be the BNM’s final monetary policy meeting this year supports the case for raising interest rates further, as more work needs to be done to contain price pressures, while the near-term fiscal outlook (including counter-inflationary measures) remains clouded by a snap general election in Malaysia.

Click to see the full preview: MNI BNM Preview November 2022.pdf