KUALA LUMPUR, Sept 6 — DAP national chairman Lim Guan Eng today said Bank Negara Malaysia (BNM) should stop hiking its overnight policy rate (OPR) as raising interest rates has no impact on rising prices.
The former finance minister said in a statement today that increasing the OPR would also be “a slap in the face” for Tan Sri Annuar Musa, chairman of the Jihad on Inflation Special Cabinet Committee, who had claimed that inflation and soaring food prices were coming under control.
“Instead of curbing inflation and the decline in the value of the ringgit, hiking up the OPR would adversely affect the people’s socio-economic wellbeing, the domestic investment climate and the country’s post-pandemic economic growth facing pressure from rising prices.
“Increasing interest rates would unnecessarily add on to the costs of individual loans on houses and vehicles, business costs, cash flows of traders and cost of funds of investors,” Lim said.
The Bagan MP was addressing rumours that BNM is expected to hike the OPR by 25 basis points this week.
If it is done to shore up the value of the ringgit against the US dollar, it would be an exercise in futility as BNM could never compete against the more aggressive interest rate hikes by the US Federal Reserve, he added.
Lim explained that raising the interest rate has no effect on prices as they were caused by excessive demand or demand-pull inflation and hiking the OPR would not reduce demand.
He added that global inflation is cost-push, caused by supply chain disruptions as a result of sanctions imposed following the Ukraine war and the Covid-19 lockdowns in China.
Last Friday, UniKL Business School Economic Analyst associate professor Aimi Zulhazmi Abdul Rashid reportedly urged BNM to find a different financial solution from raising the OPR because of worries it may burden Malaysians along with inflation and the rising cost of living.
However, analysts previously expressed the belief that BNM will further raise the OPR to 3 per cent by next year, saying rate hikes would continue for the remainder of the year amid rising inflation and BNM would continue its policy tightening further in the upcoming Monetary Policy Committee (MPC) meetings.
On May 11, BNM increased the OPR by 25 basis points to 2.00 per cent at its third MPC meeting this year, saying the sustained reopening of the global economy and the improvement in labour market conditions has continued to support the recovery of economic activity.
In July 6, BNM increased the OPR by 25 basis points once more to 2.25 per cent during its fourth MPC meeting this year.
However, BNM said risks to growth remain, which included a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, and adverse developments surrounding Covid-19.
