Analyst: OPR hike inevitable

PETALING JAYA: Most analysts believe that a hike in the OPR is inevitable, with the concensus at a 25 basis point hike in the second half of the year.
Earlier this month, Alliance Research said the OPR is expected to remain steady well into the first half of 2014, before a potential 25bps hike sometime in the second half of this year.
"We continue to profess a "no change" policy in the near-to-medium term. We continue to believe the OPR will remain steady in most parts of 2014, as inflationary pressures are particularly driven by cost-push factors. However, the OPR has a 50-50 chance of being raised by 25bps in the later part of 2014," it added.
BIMB Securities Research said higher cost pressure for an extended period coupled with strong demand could trigger an interest rate hike in 2014.
"We expect benchmark interest rate to remain unchanged in the first half of 2014 although prices have picked up considerably. Based on a slew of price increases in food, petrol, electricity and other goods and services, we think that there is a high possibility of a rate hike by 25bps in 2014 as the BNM positions itself to be ahead of the curve to avert an excessive price increase following some of measures to be undertaken by the government to reduce the burden on its coffers," it said.
HLIB Research said its base case of a 25bps tightening in July is premised on a sustained recovery in the external sector amid resilient domestic demand while strong inflation pass-through is observed.
RHB Research Institute also expects the central bank to increase its OPR by 25bps in the later part of the third quarter of 2014 to 3.25%.
"We believe it is still important for the central bank to take a preemptive move to control rising inflationary expectations and given that inflation will be accelerating for two consecutive years in 2014-2015. This is especially the case if the government were to continue to raise fuel prices by another round in the second quarter or third quarter of 2014, following an increase in September 2013 and a power tariff hike in January 2014," said RHB Research Institute.
However, Kenanga Research believes that BNM is unlikely to raise the OPR in 2014, keeping it at 3%, a level shown to be supportive of domestic growth.
"Though the external situation is beyond our control, we are confident that BNM will act accordingly to ensure the stability of the Malaysian economy," it said.