KUALA LUMPUR: The economy is expected to have seen a growth of 1.1% quarter-on-quarter in the first quarter of 2022, following a 6.6% expansion in the prior fourth quarter of 2021.

       This is aided by the gains from a robust external position, which has largely extended into the beginning of this year.

       These are some projections from Moody’s Analytics ahead of an announcement by Bank Negara that is expected later this week.

       “A lift in private consumption after an easing of Covid-19 restrictions and policy shift towards living with the virus is likely to have supported the growth in the first quarter,” Moody’s Analytics said in a report.

       It is also expecting that Bank Negara will keep the overnight policy rate steady at 1.75% at its May meeting.

       This is on the back of inflation readings for the month which are expected to trend higher in Asia.

       Among other Asian countries, India’s consumer price index is likely to have risen to 7.3% year-on-year (y-o-y) last month from 7% in March due to higher food prices and elevated energy costs.

       Consumer prices in Indonesia are expected to have picked up to 3% y-o-y in April from 2.6% previously.

       On a related matter, Kenanga Research said domestic bond yields may be in a limited range-bound zone this week as the market will be focused on Bank Negara’s monetary policy committee meeting this week.

       “Malaysian government securities will likely remain sensitive to the volatility of US Treasuries.

       “We expect Bank Negara to keep the policy rate unchanged at 1.75%, especially given the downside risks to global growth amid the Russia-Ukraine conflict and China’s Covid-19 outbreak condition,” Kenanga Research said.

       The research house said foreign demand for local bonds will likely remain pressured in the near term, given the weak global sentiment for bonds and the recent US Federal Reserve’s (Fed) 50-basis-point rate hike.

       “We expect a net outflow of foreign funds in April, but a smaller outflow in May due to a lack of major bond maturities which is scheduled for this month,” it added.

       Kenanga said this may reinforce the ringgit’s weakness in the near term as it is expected to remain under pressure in May, given that the dollar index and the 10-year US treasury yields may continue to trend higher due to the Fed’s aggressive tightening cycle.

       The research house noted that the direction of the ringgit will also be influenced by the policy rate decision, China’s Covid-19 policy and the overall global economic outlook.