DAP urges Bank Negara not to raise interest rates

DAP has urged Bank Negara not to increase its overnight policy rate (OPR) - widely expected to be by 25 basis points from 2.25 percent to 2.5 percent - this week.

In a statement today, DAP chairperson Lim Guan Eng said previous efforts by Bank Negara to increase the OPR appeared to have no effect on inflation, with the consumer price index rising by 4.4 percent in July compared to 3.4 percent in June.

Lim, a former finance minister and Penang chief minister, argued that raising interest rates will not reduce inflation because it was caused by global supply chain disruptions rather than an increase in demand.

“Hiking up the OPR would also be a slap in the face by Bank Negara on Annuar Musa, the chairperson of the Jihad On Inflation Special Cabinet Committee, who claimed that inflation and soaring food prices are slowly under control.

“Neither did the increase of the OPR make any positive impact on supporting our ringgit in the currency market,” said Lim.

Lim warned that instead of curbing inflation and the declining value of the ringgit, hiking the OPR would adversely affect the rakyat’s socio-economic wellbeing, the domestic investment climate and the country’s post-pandemic economic growth that is already 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.

“Bank Negara and the government should be helping businesses, not harming businesses, especially SMEs, struggling to survive and revive their business in the difficult post-Covid economic environment," said Lim.

Bank Negara maintained a 1.75 percent OPR for two years since the start of the Covid-19 pandemic. The rate has been raised twice since May.

- Mkini