Economists: Retaining OPR at 3pct will build market confidence

 the move to maintain rates should be a relief to borrowers that costs of borrowing are not higher and will support consumer spending, which is needed when external factors are difficult.

Malaysia University of Science and Technology economist Geoffrey Williams

“This will be supportive of growth and investment overall and help keep down inflation because real interest rates are now positive with inflation being below the OPR.

“It is a back-to-normal stance and a much more comfortable place to be for the moment with lower inflation,” he added.

Williams said the decision has already had a positive effect on the ringgit, which reached RM4.75 to the US dollar today compared to RM4.79 two days ago.

Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid concurred that BNM’s decision to maintain the OPR has been widely anticipated.

Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid

“The accompanying statement suggests that BNM is wary about the downside risks to growth, which means the stand of the monetary policy has to be supportive.

“Already, the Purchasing Managers' Index has been hovering below the 50-point demarcation line for 14 months in a row, suggesting that business sentiment is mostly leaning towards the cautious side,” he said.

Afzanizam said apart from that, Malaysia’s export has been in contraction mode from March to September, indicating that the weaker global demand is affecting the country’s external demand.

“Therefore, there is a need to keep the OPR steady in order to support the economy.

“The lower inflation print of 1.9 percent in September 2023 from as high as 4.7 percent in August 2022 demonstrates BNM’s credibility in steering the monetary policy. So this is good for confidence building,” he added.

On the same note, the 125-basis point hike in OPR since May last year indicates that the central bank has built reasonable policy space, he noted.

“So in that sense, BNM has the flexibility to reduce the OPR should the external environment become detrimental to the overall economy,” he said.

BNM today announced it is keeping the OPR at 3.0 percent, marking the third consecutive session that the MPC has opted for a rate hike pause, despite calls to raise the key interest rate to help stabilise the ringgit, which is near a 25-year low against the US dollar.

The last rate hike was in May, when the central bank increased the OPR by 25 basis points to 3.0 percent.

- Bernama