Will BNM hit the brakes on monetary tightening and leave the rates unchanged: Kar Yong Ang, the OctaFX financial market analyst, shares his opinion.
KUALA LUMPUR, MALAYSIA – Media OutReach – 1 June 2023 – Malaysian consumer prices declined in April, driven mainly by easing transport inflation. The consumer price index (CPI) rose by 3.3% in April from a year earlier, the Department of Statistics said on Friday. That compares with an increase of 3.4% in March and is in line with the median forecast of 22 economists polled by Reuters. The annual core inflation rate has slowed to 3.6% (from 3.8% recorded in March).
‘Inflation in Malaysia seems to have peaked out’, said Kar Yong Ang, the OctaFX financial market analyst. ‘With exports falling and the economy likely to slow down, I expect Bank Negara Malaysia to hit the brakes on monetary tightening and leave the rates unchanged‘, he added.
Indeed, Malaysian exports plunged by more than 17% in April, while the latest Manufacturing Purchasing Managers Index (PMI) was still in the contraction territory. The impressive growth in gross domestic product (GDP) of 5.6% achieved in Q1 2023 is unlikely to hold, given that the demand in China has been rising slower than expected. However, like many other central banks in emerging Asia, BNM is still facing the problem of balancing economic growth, inflation, and depreciating currency.
‘I think that BNM can now afford to focus a bit more on stimulating growth as opposed to tacking price pressures‘, said Kar Yong Ang, adding that ‘inflation was already at a 10-month low and below the official inflation target’. Refinitiv data shows that BNM’s official inflation target is between 3% and 4%.
Although the Malaysian ringgit (MYR) has depreciated substantially over the past three weeks, its weakness is primarily due to external rather than internal factors—specifically, the rise in the U.S. dollar. Indeed, MYR was actually gaining 0.02% following the release of the latest inflation data.
‘It seems reasonable to infer that USDMYR may have reached a mid-term top’, said Kar Yong Ang. ‘After rising for seven consecutive days, the bullish rally seems to be losing steam. Technically, the USDMYR may form a shooting star technical pattern today, which normally signifies the exhaustion of the preceding trend. Thus, I expect the USDMYR to stabilise and pull back towards 4.58 in the short term’.
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About OctaFX
OctaFX is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services already utilised by clients from 180 countries who have opened more than 40 million trading accounts. Free educational webinars, articles, and analytical tools they provide help clients reach their investment goals.
The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.
In the APAC region, OctaFX managed to capture the ‘Best Forex Broker Malaysia 2022’ award and the ‘Best Global Broker Asia 2022’ from Global Banking and Finance Review and International Business Magazine, respectively.
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This content was prepared by Media OutReach. The opinions expressed in this article are the author’s own and do not reflect the view of Siam News.
