KUALA LUMPUR: Even if the United States’ Federal Reserve (Fed) cuts interest rates as anticipated, Bank Negara Malaysia (BNM) is expected to hold the ...
Even if the United States’ Federal Reserve cuts interest rates as anticipated, Bank Negara Malaysia is expected to hold the Overnight Policy Rate at 3% till the end of 2025 amid a strengthening ringgit.
“With the prevailing large 250 bps gap between the OPR of 3% and the FFR of 5.25-5.50%, the team expects no cut to domestic rates, with the OPR to stay pat at 3% in 2024 and 2025, particularly since the risk to domestic inflation remains on the upside,” it said in a note today. “In the absence of rate cuts that could further exacerbate net interest margin compression, we expect average NIMs to stabilise with potential upside bias into 2025. What has been encouraging as well is that industry current account or savings account balances have resumed growth, and this will help to ease margin pressure,” it said.
“What this implies is that banks could potentially continue to realise marked-to-market gains on their investment portfolios, which would serve to uphold non-interest income,” it said, adding that the volatility of the currency would serve to ensure that forex income remains buoyant.
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