KUALA LUMPUR, March 21 (Bernama) -- With the US Federal Reserve (US Fed) having signalled that there would be no interest rate hikes this year due to slower economic growth, Bank Negara Malaysia’s (BNM) monetary stance is expected to tilt towards easing, said Kenaga Investment Bank Bhd.

In its economic viewpoint today, it said with the US Fed sounding increasingly cautious on growth and dovish in its monetary stance, the world’s central banks are mostly beginning to tilt their monetary policy towards a more neutral stance or moving towards easing.

“As a result, we believe, it would also give BNM more room to adjust its short-term benchmark interest rates lower this year.

“It also means, the probability, that BNM would cut the overnight policy rate (OPR), has increased by another notch,” it said.

However, it said that a definite rate cut decision by BNM would still hinge on how sharp the deceleration of Malaysia’s growth trajectory would be, going forward.

“In the event that the domestic economic indicators slow sharply, we expect that BNM may not hesitate to ease its monetary policy stance and cut the OPR.

“For now, we maintain our stance that the OPR would remain unchanged this year,” the bank said.

It also said any indication that BNM would forecast a lower gross domestic product for 2019 than the 4.9 per cent projected by the Finance Ministry, as well as a more dovish signal by the central bank at its next Monetary Policy Committee meeting in May, would give a strong reason to predict a possible rate cut in the second half of this year.

“BNM will release its annual report on March 27 and provide a fresh outlook on the economy for this year and which may differ in its forecast from that of the Finance Ministry which apparently still has a relatively more sanguine outlook,” Kenaga Investment Bank.

-- BERNAMA