MONEY MASTER

Bank Negara Malaysia (BNM) is expected to maintain the Overnight Policy Rate (OPR) at 3% by the end of 2025, even if the United States Federal Reserve proceeds with anticipated interest rate cuts. This projection comes amidst a strengthening Malaysian ringgit and prevailing economic conditions. US Federal Reserve Outlook Interest Rate Cuts Expected: The US Federal Reserve may begin reducing interest rates as early as September 2024 due to easing inflation and rising unemployment. Maybank Investment Bank Bhd (Maybank IB) anticipates a 50 basis points (bps) cut to the Fed Funds Rate (FFR) in 2024, followed by 100 bps cuts in 2025. Current Rate Gap: There is a significant 250 bps gap between Malaysia's OPR of 3% and the current FFR range of 5.25% to 5.50% . Despite this gap, Maybank IB does not foresee domestic rate cuts due to potential upward risks to domestic inflation. Impact on Malaysian Banking Sector Bank Margins and Income: The expectation of stable interest rates in M...

News The ECB cut its overnight deposit rate to -0.4% from -0.3%. Its main refinancing rate was also cut to 0% from 0.05%. The ECB’s monthly asset purchases are raised to €80bn from €60bn and investment grade corporate bonds are now included in the purchase programme. A new series of 4 targeted longer-term refinancing operations (TLTRO II) will be launched. ECB President Mario Draghi said he does not anticipate further need for monetary stimulus. Comment The massive monetary stimulus shows that the ECB is desperate to defend the Euro zone from deflation risk and is willing to drive interest rates deeper into the negative territory despite the potential backlash on net interest margin of banks. We are mildly positive on the latest ECB stimulus as it prevents further slippage of growth and inflation expectations. We maintain our GDP growth forecast of Euro-area at 1.5% (2015: +1.5%). Despite exceeding market expectations, the impact of ECB stimulus may be muted for the ...

Bank Negara Malaysia (BNM) has raised the overnight policy rate (OPR) by 25 basis points to 3.25%. This is the first hike in the OPR since May 2011. The decision was made at the Monetary Policy Committee (MPC). BNM also released a statement, saying "The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 3.00 percent and 3.50 percent respectively." OVERNIGHT POLICY RATE? WHAT IS THAT? Have you ever wonder what is this OPR that these people are talking? I used to have big difficulty understanding the business and financial vocabulary. In short, OPR is the interest rate at which a bank lends to another bank, which is set by the BNM.  This rate has an effect on the country's employment, economic growth and inflation. Generally, it is an indicator of the health of a country's overall economy and banking system. WHY IS THERE A HIKE? There is a lot of reason for the increase in the OPR but there are a...

As expected, the meeting today had an outcome...Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) to 3.25%. The 25 basis points increase is the first in 3 years and has been expected by the market. The floor and ceiling rates of the corridor for the OPR has increased to 3% and 3.5% respectively. The Monetary Policy Committee believes that the country economy is going for a steady growth part. As to inflationary pressures, it said inflation has been relatively stable as the effects of the price adjustments for utilities and energy continue to moderate. Demand driven inflation remains contained. “Looking ahead, inflation is, however, expected to remain above its long-run average due to the higher domestic cost factors.” The increased in OPR will eventually effect commercial banks' Base Lending Rate. It will be interesting to see how the effect will impact the household in the country.