Several economists have weighed in to say that Bank Negara Malaysia (BNM) is unlikely to raise the overnight policy rate (OPR) for the fourth time in a row, in the Monetary Policy Committee meeting next month. This is as Malaysia’s inflation rate has remained comparatively low, in relation to other Asian economies, and as such, any further OPR hikes will likely be put off to at least early 2023.

“In the past, Bank Negara has never increased the OPR for four straights times. Therefore, I don’t think this will be the first time they are going to do it, since our country is still experiencing a stable and positive gross domestic product growth and low inflation rate. I also believe that another rate hike will not have an impact on the ringgit status,” said economic analyst from the Putra Business School, Associate Professor Dr Ahmed Razman Abdul Latiff.

Similarly, economist from the Malaysia University of Science and Technology, Dr Geoffrey Williams also believes that there is only moderate pressure for BNM to increase the OPR next month. This is as the central bank has upheld its mandate very well in recent times – which is to support Malaysia’s financial stability, promote sustainable economic growth, as well as maintain price stability.

“We have these things now, so the pressure to raise rates should moderate,” the economist noted, who further said that BNM also believes it is possible to normalise interest rates now without putting too much pressure on the people. He also stated that the central bank doesn’t have a target to hit with regard to the OPR, although historically, the rate typically ranges between 2.5% to 3%.

“Of course, it recently had been lower, and in the past, sometimes a little higher at 3.25%. So we’re in the range now, and there is less chance of a change. It is not inevitable that they will increase further next month. It depends on economic conditions,” said Dr Geoffrey, adding that even though the OPR decision will likely be made during Malaysia’s upcoming general election campaign (GE15), BNM can be trusted to make its decision based on its mandate and economic conditions instead of political considerations.

During Covid-19, BNM had lowered Malaysia’s OPR from 3% pre-pandemic to a historical low of 1.75% via a series of cuts during 2020 and 2021. It subsequently raised the rate for the first time after that in May 2022, by 25 basis points (bps), followed by another two consecutive increases of 25 bps in July and in September. The OPR now stands at 2.50%.

Meanwhile, BNM itself has reassured the public that a drastic increase of the OPR by the end of 2022 is not in the books. Instead, it will be carried out in a measured and gradual manner to avoid any unwanted or unexpected consequences.

(Source: New Straits Times)

• TAGS:
• Bank Negara Malaysia
• BNM
• Dr Ahmed Razman Abdul Latiff
• Dr Geoffrey Williams
• Geoffrey Williams
• OPR
• OPR Cut
• Overnight Policy Rate