PETALING JAYA: With the economy emerging from the recession more strongly than anticipated in the last quarter, Bank Negara is expected to begin unwinding in a gradual manner, the aggressive monetary measures that had been mounted in response to the global financial crisis.

According to RAM Holdings Bhd chief economist Dr Yeah Kim Leng, at the Monetary Policy Meeting on Thursday, Bank Negara was expected to raise the statutory reserve requirement (SRR) to 2% from the 1% that has been in place since March 2009 after it was brought down from 3.5% before the outbreak of the global financial crisis in September 2008.

“We also see a strong likelihood of a 25 basis points (bps) rise in the Overnight Policy Rate (OPR) in the coming sitting as part of the 0.75% to 1% adjustment anticipated this year, to bring the OPR to a normal level which we estimate at 3.25% to 3.50%,” he noted.

But then again, Yeah said their OPR expectation could be delayed until May meeting if Bank Negara decided to give more weight to global growth concerns in light of the sovereign debt woes that had surfaced in Europe, particularly in Greece, weakening consumer sentiments in several advanced economies besides the recent testimony by the US Federal Reserve chairman that US interest rates would remain low for a considerable period due to the still fragile economy.

Meanwhile, Malaysia Rating Corp Bhd chief economist Nor Zahidi Alias expects a 25bps hike in OPR and a 50bps hike in SRR on Thursday following a stronger-than-expected growth in the fourth quarter.

“In addition, a steady increase in inflation rate evidenced by the recent upward trend in the Malaysian consumer price index could affect depositors’ real rate of return if the benchmark rate is not adjusted upward,” Zahidi added.

According to Bloomberg, Bank Negara would increase OPR by 25bps on Thursday and would be the second central bank in Asia to raise interest rates after the global recession. Bank Negara, which earlier said that borrowing costs could not be kept “too low” for too long, was likely to turn words into action on Thursday by scaling back on emergency stimulus measures as th

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e country had exited from recession in the fourth quarter last year, Bloomberg said.

Reserve Bank of Australia governor Glenn Stevens was the first central banker in the world last year to raise borrowing costs, announcing three increases after the South Pacific nation avoided a recession.

“An increase on March 4 would place Bank Negara ahead of policy makers in South Korea and India in paring back monetary stimulus,” Bloomberg added.