KUALA LUMPUR - Middle-and high-income households in Malaysia will be the groups most affected by the central bank’s surprise decision to raise the overnight policy rate (OPR) on May 3. Read more at straitstimes.com.
KUALA LUMPUR - Middle-and high-income households in Malaysia will be the groups most affected by the central bank’sThis is because more than half of them have floating rate loans, with interest rates that move up and down depending on market conditions. A rise in the OPR, which is the minimum interest rate charged among banks in the interbank money market, means having to pay higher interest.
Bank Negara has increased the OPR five times, totaling 125 basis points since May 2022. On May 3, the central bank raised it by another 25 basis points to 3 per cent in a surprise move, bringing the OPR back to pre-pandemic levels. “At this point, my savings are being squeezed. I also have to take care of my parents so I really have to tighten my belt. At the same time, the asset’s value is not increasing in this property market,” said the 35-year old journalist.
Bank Muamalat Malaysia chief economist Mohd Afzanizam Abdul Rashid said the impact of the rate hike on households depends on the size of their loan.UOB Group senior economist Julia Goh sees the rate hike as a pre-emptive move due to the risk of inflation possibly climbing with subsidies, such as those for fuel, expected to be cut later this year.
“Subsidy rationalisation will post more upside pressure for consumer price inflation, living costs and business operating costs in the second half of 2023 should they materialise. This alongside uncertainty surrounding the six state elections could make it more challenging to raise rates further in second half,” said its report.
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