KUALA LUMPUR, Jan 3 - Malaysian Rating Corp Bhd (MARC) expects Bank Negara Malaysia (BNM) to maintain its overnight policy rate (OPR) unchanged at three per cent despite pressures to lower it amid a weakening external sector.
MARC said it expected the monetary policy to remain unchanged with a slight upside bias unless the growth momentum were to decline significantly. "We sense that the BNM is not willing to endanger the financial system by inducing more over-leveraging practices through lower interest rates, especially among households," it said in the "Economic Outlook 2013: Sustaining Domestic Pillars Amidst Global Uncertainties" report.
MARC said it expected the monetary policy to remain unchanged with a slight upside bias unless the growth momentum were to decline significantly. "We sense that the BNM is not willing to endanger the financial system by inducing more over-leveraging practices through lower interest rates, especially among households," it said in the "Economic Outlook 2013: Sustaining Domestic Pillars Amidst Global Uncertainties" report.
It said as household debt-to-gross domestic product has topped 60 per cent in the past one decade, premature reductions in the policy rate will not be in line with the central bank's intention to curb households' appetite for debt. The rating agency said raising the policy rate at a time when the US Federal Reserve System was planning to keep the rate unchanged for a considerable period will lure more capital inflows.
MARC said BNM has normalised the OPR to three per cent over the last four years from as low as two per cent during the recession in 2009. It said among the primary reasons for keeping the rate status quo were: upside surprise in gross domestic product growth in the first three quarters of 2012; strong consumer sentiment; and, high household indebtedness.
Source: www.btimes.com.my
Published: 2013/01/03