Central bank is likely to pause rates again at their following discussion at Nov 12, states Senior Economist at AmResearch. “Due to Central Negara having frontloaded rate hikes in the early part of this year, we notice more flexibility in keeping to a fairly neutral position. In our view, presently there may be no more hikes over the up coming three to six months,” he believed in an economic update report today.
The central bank during its previous meeting in September, operated the overnight policy rate (OPR)steady at 2.75 per cent. Central bank governor Tan Sri Dr Zeti Akhtar Aziz had informed yesterday, which the central bank would not hesitate to get involved in the currency exchange market, in the event that movements with the ringgit became “disorderly”.
The ringgit this morning, exchanged at 3.1000 versus the US dollar compared to 3.0940 at Tuesday closing. Year-to-date, the local unit has got strengthened almost 10.5 per cent towards the dollar, simply because investors pump in cash right into higher-yielding emerging market assets.
“More and more emerging countries are beginning to fasten the noose around speculative activities, as inflow involving hot cash may trigger their currencies towards appreciate beyond fundamentals, damaging competition.
“We do not think Central bank may resort towards any kind of much more capital controls, because it will definitely impact investor faith, during a period when ever we tend to be attempting to attract foreign direct investments,” he added.
Rather than capital controls, Central bank certainly can strengthen the financial market place and its reserves whilst implementing a firmer policy to deter speculative activities in the property market such as putting a limit on the 3rd home loan or tightening up guidelines for foreigners buying residential properties.
This, he explained, can likely decrease the actual inflow of hot funds and the creating of a bubble into certain property classes. “The central bank may have to positively look into unorthodox counter-cyclical steps, possibly even if it means a rate minimize,” he mentioned.
He highlighted which latest data revealed inflation moderating to 1.8 per cent in September, from 2.1 per cent in August, and this particular further supported Bank Negara’s flexibility in containing any asset bubble in the system.