There is a possibility that Malaysia’s central bank will increase its benchmark overnight policy rate (OPR) by year-end or early-2018, reported the Asia News Network.
This projection is based on an improving economy, which typically means a rise in salaries, inflation and consumption, while the unemployment rate declines.
Earlier this year, most experts believe that the OPR will remain the same in 2017. The last time it was changed was one year ago, when officials from Bank Negara Malaysia slashed it by 25 basis points to three percent amidst the sluggish economy back then.
The central bank’s monetary policy committee is scheduled to meet to 13 July, but most experts think that the OPR will be unchanged as it’s too premature for their statistics to reveal a firmer trend.
Nevertheless, the country’s gross domestic product expanded by 5.6 percent in Q1 2017. There also many signs that exports are growing, likewise for business spending.
Another reason policymakers might consider a rate hike is to support the soft ringgit. Even though it is considered one of Asia’s top-performing currencies this year, the exchange rate is still high at over RM4 per US dollar.
With the US Federal Reserve expected to further increase their own interest rate by 50 basis points after a gain of 25 basis points last month, the ringgit is expected to be under pressure, and this would lead to a higher inflation rate. In fact, the core inflation has already reached 2.6 percent in May on an annual basis, surpassing the central bank’s target of between 2.3 percent and 2.5 percent.
Hence, Bank Negara Malaysia might raise the OPR to help alleviate the pressure on the local currency and ease the inflation rate.
While there are fears that the rate hike will negatively affect growth, particularly in private consumption, the market is likely capable of handling a hike of 25 basis points if the economy continues to flourish.
Image sourced from Malaysia Chronicle
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email Editorial-MY@propertyguru.com.my
For more information on new top homes, check out PropertyGuru’s New Property Launches and Project Reviews
