PETALING JAYA: Hiking the overnight policy rate (OPR) is a futile exercise in tackling inflationary pressures which have been caused by supply chain disruptions, the Malay Economic Action Council (MTEM) said.
In dismissing the notion that it was good for the economy, MTEM chairman Abdul Halim Husin said it had received complaints from Bumiputera associations, entrepreneurs and people on the ground about the OPR hike.
Halim maintained there was no correlation between the ringgit and the OPR. “When our interest rate was below 2%, the ringgit’s rate against the US dollar was within the range of 3.00 to 3.20,” he said in a statement.
“During the 1997 economic crisis, the interest rate was 6.9% and the ringgit was at 3.90 for every US dollar. In 2010, when interest rates were lowered to 2%, the ringgit appreciated to the range of 3.10 to 3.40.”
Last week, BNM raised the OPR by 25 basis points (bps) to 2.50%, the central bank’s third consecutive hike.
In May, the central bank raised the OPR to 2% from 1.75%, reportedly the lowest on record, following a 25 bps cut in July 2020. In July, it raised the OPR by another 25 bps to 2.25%.
Halim said total debts and various advances to banks stood at RM1.57 trillion as of May, while financial institutions were expected to reap RM3.9 billion in revenue a year with every 25 bps increase, or RM1.57 billion annually, with a 1% hike.
“In truth, banks record huge profits without doing anything for every OPR hike while the people and micro, small and medium-sized enterprises (MSMEs) are forced to cough up more money for monthly loan installments.”
He called for a zero-interest moratorium of at least two months for MSMEs for every 25 bps hike to ease the burden on households and businesses.
He suggested that Putrajaya consider implementing a lower currency exchange floor rate as a short-term measure, as well as a study on payment and receipt policies for exports and imports in the long-term. - FMT
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