Fitch predicts 2 more interest rate hikes for Bank Negara!
According to international rating agency Fitch, Malaysia’s inflation rate continues to be higher than the historical average, which means that the country’s real interest rate is negative and it is necessary for the National Bank to continue to raise interest rates to normalize monetary policy.
Fitch predicts that the Bank Negara will raise interest rates by 50 basis points in 2023, which means that the overnight policy rate (OPR) will increase to 3.25% from the current 2.75%. But the OPR could also exceed 3.25%, which is because the Fed remains hawkish.
The U.S. federal prime rate is currently in a target range of 3.75% to 4.00%, while the upper and lower limits for the overnight policy rate in Malaysia are 2.50% to 3.00%. This means that there is already a difference of more than 1% between the two countries’ interest rates.
If the gap between the U.S. federal prime rate and the Malaysian overnight policy rate widens, the Malaysian dollar will face greater selling pressure and will depreciate further at that time. The current exchange rate of USD1 is RM4.74.
