PETALING JAYA: Business and consumer groups have welcomed the decision by Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at 3%.
They said the pause had come as a relief given that price increases would be averted.
Small and Medium Enterprises Association (Samenta) chairman William Ng said keeping the OPR at 3% was crucial in keeping costs at a manageable level.
“In our engagements with Bank Negara and the finance ministry, we have stressed the importance of maintaining the OPR at the current level,” Ng told FMT Business.
“Any increase in costs now will be detrimental to growth and recovery,” he added.
He said while inflationary pressure had eased for consumers and producers, a policy to help in managing costs and containing cost increases was still essential in the short term.
Federation of Malaysian Manufacturers (FMM) president Soh Thian Lai said a recent poll of its members showed that industry players were “feeling the pinch” of higher interest rates.
At the previous meeting of its monetary policy committee (MPC) in early May, the central bank raised the OPR by 25 basis points (bps) to 3%.
Soh said increases in the interest rate had raised the cost of production, affecting cash flow for businesses.
“As a result, industries had to streamline their operations and strategies to reduce capital (investment) and maximise profit,” he told FMT Business.
Soh said there had also been concerns that consumers would change their spending habits with increases in interest rates. This, he said, would affect sales and, by extension, cash flow for businesses.
Federation of Malaysian Consumers Associations (Fomca) secretary-general Paul Selvaraj said this meant that interest rates on loans would not be raised, which would be a relief for people already burdened by the rising cost of living.
While he expressed hope that BNM would maintain the OPR at 3% for the foreseeable future, Selvaraj said it was even more crucial for the economy to stabilise.
When announcing its decision to keep the OPR at 3% today, BNM said the monetary policy stance was “slightly accommodative and remains supportive of the economy”.
It said that following a strong performance in the first quarter of the year, the economy expanded at a more moderate pace in recent months as exports were weighed down by weaker external demand, as expected.
BNM’s decision to raise the OPR by 25bps on May 3 caught many by surprise given that it had hit the pause button at two previous meetings in January and March.
Prior to that, the OPR had been raised by 25bps at each of the four MPC meetings from May to November last year.
Source: https://www.freemalaysiatoday.com/category/nation/2023/07/06/business-consumer-groups-laud-decision-to-keep-opr-at-3/