Bank Negara Urged Not To Increase Interest Rate In September

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Bank Negara is urged to stop increasing its interest rate in September to prevent adding to the burden on loan borrowers.
To sustain robust economic growth, DAP national chairperson Lim Guan Eng said Bank Negara should stop hiking interest rates, which have increasingly burdened businesses and housing loan borrowers.
He said despite the country’s GDP growing for the first half of 2022 by 6.9 percent, this is not reflected in the performance of Bursa Malaysia and in the value of the ringgit.
"The ringgit continues to decline against the Singapore dollar falling to the lowest value on record of RM3.25 on Aug 11, falling to a five-year low to the US dollar at RM4.46, and has even weakened against the Indonesian rupiah.
"Despite high oil and palm oil prices, the ringgit continues to depreciate when it should be strengthening.
"Bank Negara’s increase in interest rates by 50 basis points has no discernible effect. The weak ringgit has wreaked havoc for businessmen with rising prices for imported materials," said Lim in a statement.
EPF special withdrawal
The former finance minister also expressed concern about whether the second quarter economic growth is too reliant on firm domestic demand, particularly the RM44 billion one-off EPF special withdrawals.
He said since there will be no more RM44 billion one-off EPF special withdrawals in the pipeline, the country’s economic growth will depend on external demand, which is subject to slower global growth.
Former finance minister Lim Guan Eng"Whilst the government continues to express optimism that Malaysia can achieve the 2022 projected economic growth of up to 6.3 percent, this sentiment is not shared by the International Monetary Fund which lowered its growth target of Malaysia to at best 5.6 percent for 2022," said Lim.
According to Kenanga Research (Kenanga), Bank Negara is likely to maintain its hawkish stance in September and increase the overnight policy rate (OPR) for the third consecutive time this year.
In a note earlier this week, the research house believed the OPR hike would be based on the expectation that Malaysia's inflation rate would average above the 4.0 percent level in the second half of 2022 (2H22) due to rising food prices amidst swelling import costs.
“In an effort to realign with other central banks’ hawkish stance, we reckon that Bank Negara may continue to tighten post-September meeting, with the OPR reaching 3.0 per cent by the first quarter of 2023 (1Q23),” it said in a Bernama report.
Umno Youth chief Asyraf Wajdi DusukiMore bankruptcy
Similarly, Umno Youth chief Asyraf Wajdi Dusuki also urged Bank Negara not to increase the OPR which he said doesn't help counter the inflation.
"With the increase of OPR, as in conventional monetary theory, Bank Negara is hoping that the business sector will reduce investment and household sector will reduce expenditure while increasing saving rate.
"However, with the current high rate of our household sector debts, an increase of interest rate will only reduce household expenditure via increase paying back of loans, but not through the increase of saving rate.
"The increase of inflation rate was not because of excess in demand, but due to problems related to supply-side disruption and energy supply shock because of Ukraine war, therefore increase of OPR will not succeed in reducing inflation rate," Asyraf said.
He added that in the national economic situation that is not fully recovered, the additional financial burden from the increase of OPR may have a big possibility of dragging more people into insolvency. - Mkini

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