News

Higher OPR Interest Rates May Cause More Pain – “This Will Lead To A Contraction In The Economy, Which Means The Rakyat Will Suffer”

Malaysians have been cautioned against pinning their hopes entirely on the increase in interest rates for a quick economic recovery.

Center for Market Education CEO Carmelo Ferlito explained that raising interest rates is akin to taking money out of the system, and by extension reducing consumer spending.

“This will lead to a contraction in the economy, which means the economy will suffer,” he told FMT Business.

“But this is the price to pay to cool down the economy,” he added.

At its monetary policy committee (MPC) meeting yesterday, Bank Negara Malaysia (BNM) decided to raise the overnight policy rate (OPR) by another 25 basis points (bps), from 2% to 2.25%.

This is the second rate increase this year. In May, the central bank raised the OPR by a similar quantum to 2%. It had been languishing at a record low of 1.75% since a 25bps reduction in July 2020.

BNM cited the reopening of the global economy and the improvement in labour market conditions among the reasons for its decision to raise the OPR.

Ferlito said raising interest rates would not be enough to rein in inflation unless it is accompanied by cuts in government spending.

He said hikes in interest rates could also discourage investments. “However, if we look at the different components of Malaysia’s GDP, we can see that investments are already flat,” he added.

On the other hand, he said, the impact of a rise in the OPR on investment is less of a certainty. “It depends on how investors perceive the move and that, in turn, will also affect the ringgit,” he said.

“If investors interpret it positively, the ringgit will strengthen and it will not benefit exporters,” he said. “However, if they express concerns, the currency suffers and exporters may benefit, albeit temporarily.”

Reflecting his views, Rakuten Trade vice-president Thong Pak Leng said the hike in interest rates would have a negative impact on the overall market.

An hour after BNM announced the rate hike yesterday, the FTSE Bursa Malaysia KLCI (FBM KLCI) lost 17 points from the opening bell, underscoring Thong’s assessment of its impact on investor sentiments.

The benchmark index closed the day at 1,420.85 points, down 19.96 points from the previous day’s close.

Economists also agree that the rise in the OPR would have a dampening effect on the property sector.

Sunway University professor of economics Yeah Kim Leng pointed out that those with home loans would be affected while Socio Economic Research Centre Malaysia executive director Lee Heng Guie said it would “leave a dent” in the property market.

“While savers will gain, the borrowers will face harder times,” Lee told FMT Business. “This would lead to a higher rate of defaults on loans.”

Yeah noted that in addition to a rising cost of living and inflation, borrowers will now also have to fork out even more money to service their loans.

However, it is not all bad news. For instance, the banking sector will be the early winners.

Bank Islam Malaysia chief economist Afzanizam Abdul Rashid told FMT Business the lag time between the adjustments in the lending and deposit rates would give the financial services sector an immediate gain.

He said financial institutions with higher exposure to variable rates within their portfolio would have the most to gain.

Source : FMT

43 Comments

43 Comments

  1. Aurliepakt

    July 8, 2022 at 7:37 am

    459 free casino slots
    slots casino
    all free triple double slots

  2. Shaynapakt

    July 14, 2022 at 4:56 pm

    need help with dissertation
    cheap dissertation help in los angeles
    uf thesis and dissertation

  3. Joetepakt

    July 16, 2022 at 5:18 am

    dissertation writing tutors
    phd dissertation writing help
    phd dissertation peer reviewing help

  4. Joetepakt

    July 19, 2022 at 4:56 am

    doctoral dissertation
    doctoral dissertation help history
    dissertation writing tutors

  5. 온라인바둑이

    July 20, 2022 at 11:20 am

    Hello, you used to write excellent, but the last several posts have been kinda boring… I miss your great writings. Past several posts are just a little bit out of track! come on!온라인바둑이

  6. Chandapakt

    July 20, 2022 at 10:50 pm

    example of dissertation
    dissertation writing and editing
    online edd no dissertation

  7. Avivapakt

    July 21, 2022 at 5:01 pm

    marketing acknowledgement
    help with dissertation
    best dissertation writing service review

  8. Dortheapakt

    July 22, 2022 at 12:34 pm

    dissertation abstract
    writing a dissertation literature review
    what is a dissertation paper

  9. Verieepakt

    July 23, 2022 at 7:23 am

    getting help online
    premium dissertation writing service
    dissertation literature review

  10. Suzannpakt

    July 24, 2022 at 11:39 am

    writing a dissertation introduction
    dissertation help service
    dissertation search

  11. Sallipakt

    July 25, 2022 at 6:08 am

    writing a dissertation
    mba dissertation help
    help with dissertation writing

  12. Darsiepakt

    July 26, 2022 at 2:22 am

    dissertation acknowledgements
    writing a doctoral dissertation
    dissertation proposal writing service

  13. Tandipakt

    July 26, 2022 at 5:27 am

    top us online casino
    us casinos online
    online casino sign up bonuses

  14. Mabellepakt

    July 27, 2022 at 12:10 am

    dissertation example
    proposal and dissertation help plan
    writing the doctoral dissertation

  15. Tandipakt

    July 27, 2022 at 6:40 am

    online gambling reviews
    online casino for us players
    bonus no deposit

  16. Jenneepakt

    July 27, 2022 at 9:53 pm

    dissertation help methodology
    help with masters dissertation
    dissertation proposal

  17. Abagaelpakt

    July 28, 2022 at 7:33 am

    online gambling sites no deposit
    mobile casinos for real money
    casino no deposit sign up bonus

  18. Herminapakt

    July 28, 2022 at 6:26 pm

    uk dissertation writing help online
    what is a dissertation
    online dissertation help

  19. Shaylapakt

    July 29, 2022 at 6:58 am

    free no deposit bonus casino
    us casino
    best casinos online

  20. DewsPiefe

    July 29, 2022 at 1:15 pm

    buy levitra online from usa cialis generic tadalafil Gb Finoecia Prescription

  21. Audrepakt

    July 29, 2022 at 2:09 pm

    dissertation writing
    average dissertation length
    dissertation help service general

  22. Verenapakt

    July 30, 2022 at 5:44 am

    real money casino
    best online casino welcome bonuses
    win real money online casino

  23. Hestiapakt

    July 30, 2022 at 10:04 am

    master dissertation
    dissertation writing memes
    average dissertation length

  24. Dixiepakt

    July 31, 2022 at 4:08 am

    casino online usa
    blackjack app real money
    no deposit casino games

  25. Laureenpakt

    August 1, 2022 at 2:03 am

    best deposit casino bonus
    free bonus no deposit
    free money casino

  26. Frannipakt

    August 2, 2022 at 2:52 am

    online casinos
    mobile casinos
    best online casino to win money

  27. Pearlpakt

    August 3, 2022 at 1:16 am

    online casinos us
    usa casinos on line
    online casinos free money

  28. Bobbiepakt

    August 3, 2022 at 11:46 pm

    top online casino real money
    mobile casino real money
    free spins casino

  29. Lesliepakt

    August 4, 2022 at 9:59 pm

    bonus casino
    online usa casinos
    no deposit casino games

  30. Victoria Farrance

    August 5, 2022 at 11:31 pm

    I am so grateful to Dr Ajayi for curing my herpes virus, 7 years ago i was having this infection that made me look so horrible, since i have been having this disease i have been in a complete agony weeping everyday, i have gone to several places trying to get a cure but nothing was change, i had to search for solution in the internet, luckily i came across this testimony of how Dr Ajayi cured a lady from this deadly Infection so i decided to contact him through his email, and told him exactly how i was feeling and he assure me that he will help me to get cured from herpes, i believed him and obeyed all they instruction he gave to me, afterwards he prepare a herbal medicine for me and send it through they ups delivery service, after some days i received the herbal medicine package to me. Then I started using it just as he did me, I was cured totally within 2 weeks of usage. Visit his website https://ajayiherbalhome.weebly.com contact him via email: ajayiherbalhome@gmail.com call or WhatsApp him +2348119071237. Please share as you read…

  31. Trudiepakt

    August 7, 2022 at 10:01 pm

    online casino win real money
    free bonus casino
    sign up bonus casino no deposit

  32. Honorpakt

    August 8, 2022 at 3:41 am

    buy vpn paypal
    free vpn no download
    nord vpn

  33. Jaynellpakt

    August 8, 2022 at 9:27 pm

    online casino reviews usa
    online real casino
    free sign up bonus no deposit casino

  34. Teddiepakt

    August 8, 2022 at 11:54 pm

    vpn free
    buy vpn uk
    best vpn apps

  35. Dulceapakt

    August 10, 2022 at 5:40 am

    best online casino
    united states online casino
    usa casinos

  36. Jenneepakt

    August 10, 2022 at 8:21 am

    best vpn for chrome free
    best vpn services
    proton vpn free

  37. gralion torile

    August 10, 2022 at 1:54 pm

    Hello, Neat post. There’s a problem together with your site in web explorer, might check thisK IE still is the market chief and a huge component of other folks will omit your magnificent writing due to this problem.

  38. Jenneepakt

    August 11, 2022 at 4:36 am

    avast vpn
    ipvanish vpn
    surfshark vpn

  39. Carolanpakt

    August 11, 2022 at 5:06 am

    best online bingo
    best online usa casinos
    online no deposit casino bonus

  40. Ashleighpakt

    August 12, 2022 at 12:52 am

    best vpn for computer
    download free vpn for pc
    buy a vpn uk

  41. Fanyapakt

    August 12, 2022 at 4:37 am

    real casino online
    online casino usa real money
    online casino game real money

  42. Kelseypakt

    August 12, 2022 at 9:43 pm

    free vpn for netflix reddit
    buy dedicated vpn
    setupvpn – lifetime free vpn

  43. Carolinpakt

    August 13, 2022 at 5:41 am

    casinos online
    what is the best online casino for real money
    free no deposit bonus

Leave a Reply

Your email address will not be published.

Most Popular

To Top