KUALA LUMPUR, Jan 12 — AmInvestment Research is projecting one to two rate hikes with 25 basis points (bps) each for this year which will be mildly positive on bank earnings.
The research firm, in a Aminvestment Bank report, said Bank Negara’s aggressive tone hinted at a potential review of monetary accommodation, which may see a revision of 25 to 50 bps in the overnight policy rate (OPR) in 2018.
“This could normalise the benchmark interest rate back to 3.5 per cent,” it said.
An interest rate hike will have a temporary positive impact on banks’ net interest income as loan rates will be re-priced higher, adjusting to the hike in the OPR before deposit rates catch up.
AmInvestment said it is expected that the lagged impact of the deposit rates to be two to three months after the adjustment in loan rates.