PETALING JAYA: Bank Negara Malaysia’s (BNM) decision to hold the overnight policy rate (OPR) steady at 3% has been welcomed across the board by the business sector, particularly micro, small and medium enterprises (MSMEs).
More crucially, the move to keep the interest rate at the current level is a boon to Malaysians who are barely managing to keep afloat financially.
Property surveyor Ernest Cheong characterised BNM’s move to maintain the OPR at 3% as a “saving grace” for many individuals.
“Our current circumstances demand nothing less than a full-on survival strategy,” Cheong told FMT Business.
He said in light of the ongoing trend where wealth disparity is widening, it is important for the government to take proactive measures to assist economically disadvantaged groups.
Calls for an OPR cut
Small and Medium Enterprises Association (Samenta) chairman William Ng said the association is grateful for the Monetary Policy Committee’s (MPC) decision to maintain the OPR as it will keep the country’s economic momentum going.
However, he said it would have been better if BNM had instituted a cut in the OPR.
“It would have been preferable if BNM had instead reduced the OPR by 25 basis points as the private sector will be seeking financing to undertake the many projects and initiatives announced under the New Industrial Master Plan 2030 (NIMP) and the National Energy Transition Roadmap (NETR).
“We have a small window of opportunity to steer our economy in the right direction and get Malaysia out of the middle-income trap. A supportive and expansionary monetary policy will help drive investments necessary for the transition,” he told FMT Business.
Malaysian Employers Federation (MEF) president Syed Hussain Syed Husman concurred a reduction is needed as the 3% OPR is straining businesses, especially MSMEs which are grappling with increased monthly repayment obligations.
“Some of the MSMEs are not able to take new loans because of the high costs to service the loans, and the high OPR put a constraint on business expansion plans.
“MEF hopes BNM can gradually reduce the OPR to ensure the cost of funds will not be too prohibitive, especially for the MSMEs,” he said.
A reduction in the OPR will encourage more businesses to invest and expand their businesses to make the projected gross domestic product (GDP) growth of between 4% and 5% for 2023 a reality, he added.
Aligned with global trends
Meanwhile, Real Estate and Housing Developers’ Association Malaysia (Rehda) president NK Tong said keeping the OPR steady is in line with global trends, led by the US Federal Reserve which has also paused after a series of aggressive interest rate hikes the past year.
“While the OPR has also moved up in the past year, it has been relatively moderate compared to other governments around the world,” Tong told FMT Business.
“It is both an indication that the government has a good handle on inflation and is in line with Prime Minister Anwar Ibrahim’s Madani concept of being compassionate to the people and ensuring sustainable prosperity.”
The NIMP is focused on employment with meaningful wages and wealth-sharing to build a more equitable and prosperous society, whereas the NETR is crucial in navigating the complexity of energy transition on a larger scale.
BNM, in its monetary policy statement today, noted both headline and core inflation are on a gradual decline, reflecting a more subdued cost environment that aligns with anticipated trends.
BNM’s decision to keep the pause button on the OPR had been widely expected. A Reuters poll earlier this week found that all 27 economists predicted that the OPR will stay unchanged.
The OPR has remained steady at 3% for the third consecutive time, following a 25bps increase from 2.75% to 3% in May.
BNM has affirmed the current OPR aligns with their strategy to bolster the economy and is in accordance with their assessment of prevailing inflation and growth prospects.