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Research house, OSK-DMG Group Economics, expects Bank Negara Malaysia to hold the overnight policy rate (OPR) steady at 3.0 per cent for at least the first half of this year due to easing inflation.
Malaysia's average inflationary rate this year is projected to ease to 2.7 per cent from 3.2 per cent last year, due to slower global growth which would help commodity prices to ease, it said.
"With inflation easing and policy rate accomodative to economic growth, we do not expect the central bank to move on its policy rate any time soon," it said in a research note today.
Inflation, as measured by the consumer price index, continued to ease in December last year, rising by a slower 3.0 per cent year-on-year from 3.3 per cent in November 2011.
In a separate statement, MIDF Research said food prices grew at the same level as in November, suggesting its "stickiness" is due to the strong demand from the festive season, effects from supply distruption and weaker ringgit-US dollar that may have raised import bills.
It said the cental bank would keep the OPR unchanged at 3.0 per cent in January but was not ruling out the possibility that it may cut 25 basis points in the second quarter of the year if the global scenario turns uglier.
"Much will also depend on how the domestic economy crafts out and exports, namely the primary related activities perform, since electrical and electronics is expected to remain unexciting," it added.
If Bank Negara reduces the OPR in the second quarter of this year, MIDF Research said, normalisation can be expected to take place in the second half.
Meanwhile, ECM Libra shared the same view, anticipating the Monetary Policy Committee (MPC) to hold the current OPR at 3.0 per cent this month.
"We justify our expectation by pointing to the core inflation, which is still high. While the real OPR is no longer in the negative region, other rates like the estimated rate on savings and fixed deposits, are still slightly negative," it said.
Nevertheless, it noted, "this does give room for a OPR cut."
ECM Libra said the case for a OPR cut is stronger since the global economy outlook is softening.
The research house said "it only expects an OPR cut of the typical 25 basis points in March when the MPC meets for the second time this year.
"We believe by March or April, the inflation rate would have slowed down to a level where the real interest rate would decidedly be in the positive region.
"We would like to highlight the MPC was comfortable with the indicative real rate hovering around 0.8 per cent throughout 2010," it added.
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