Economic analyst Aimi Zulhazmi Abdul Rashid has commented that Bank Negara Malaysia (BNM) needs to explore other financial solutions instead of merely raising the overnight policy rate (OPR) to normalise monetary policies once more. This is due to concerns that Malaysians may face worse struggles, on top of inflation and the rising cost of living.

“BNM needs to come up with a more effective solution instead of raising the OPR rate suddenly, especially when it is about to reach 3% like in 2019. The interest adjustment will definitely burden the people, not to mention the cost of living that has increased cumulatively from 2019 until now,” said Aimi, who is also an associate professor at the UniKL Business School.

Aimi further noted that OPR hikes may potentially result in cases of non-performing loans, on top of a rising inflation rate. “In theory, raising the OPR is meant to reduce inflation, but it must be handled carefully because we don’t want it to burden individual borrowers and businesses,” he added, saying that a slight increase in inflation is enough to disrupt efforts in reviving Malaysia’s economy.

Aimi also highlighted that the depreciation of Malaysia’s currency has resulted in an spike in the price of imported food; if the total of imported food originally stood at RM55 billion, then it would have risen to RM63 billion in the past year. This does not bode well for Malaysia as it is a net food importer (a country whose value of imported food is higher than its exported food).

For context, BNM has already raised the OPR by a total of 50 basis points (bps) in 2022 thus far – at a rate of 25 bps in May and July, respectively. The likelihood of further OPR hikes is high, although the central bank has also promised that it will not take an aggressive stance in adjusting the rate.

(Source: Malay Mail)

• TAGS:
• Aimi Zulhazmi Abdul Rashid
• Bank Negara Malaysia
• BNM
• Currency Depreciation
• OPR
• Overnight Policy Rate
• Ringgit Depreciation