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MNI BNM Preview - September 2022: Another 25bps Hike Likely

BNM

EXECUTIVE SUMMARY

  • The broad consensus is for BNM to hike the policy rate by 25bps to 2.50% at tomorrow’s meeting. All 17 economists surveyed by Bloomberg expect such a move, while a Reuters survey painted a similar picture (with one economist expecting a 50bps move). We also see risks tilted towards a 25bps hike.
  • Since the last policy meeting, in early July, domestic economic activity indicators have all pointed towards the need for tighter policy. Most notably was the Q2 GDP beat. Import growth is also just over 40% y/y, suggesting robust domestic demand. Falling unemployment and an improving income outlook should mean that the domestic economy remains well supported. On the inflation front, headline pressures have continued to accelerate despite inflation being at least partly contained by fuel subsidies, price controls and existing spare capacity.
  • Such a backdrop creates the risk of a 50bps move at tomorrow’s meeting. However, the current balancing act between inflation pressures and global growth uncertainties means that BNM’s gradualism is unlikely to change.
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