Skip to main content

Hikes in OPR benefits no one except the banks - Lim Guan Eng




Bank Negara Malaysia or BNM’s premature policy rate normalisation has not helped to stem the depreciation of the ringgit to the US dollar but may harm borrowing costs, hinder business expansion and hamper sustainable economic growth. Strengthening the value of the ringgit were amongst the reasons cited by those defending the 25 basis points hike in the Overnight Policy Rate(OPR) on 3 May by BNM.

It is noteworthy that in a space of three weeks, the value of the ringgit has dropped from RM4.45 on 3 May to RM4.58 today. To date many businesses affected by the drop in the value of the ringgit are still awaiting BNM’s response.
Bank Negara’s main argument for the OPR hike is the need to rein in core inflation and implement policy rate normalisation following full economic recovery from the COVID-19 pandemic. There is genuine concern whether the latest OPR hike will affect sustainable economic growth, making it difficult for Malaysia to repeat the encouraging 5.6% first quarter GDP growth in the second quarter of 2023.
According to S&P Global Market Intelligence, the seasonally adjusted Malaysia Manufacturing Purchasing Managers’ Index (PMI) remained below the 50-point mark separating monthly expansion and contraction, with the index unchanged at 48.8 in April 2023. This warning signal of a subdued Malaysian manufacturing sector at the start of the second quarter of this year is borne out by the April 2023 trade growth falling by 14.5 % year-on-year (y-o-y) to RM198 billion amidst global economic uncertainties.
Hikes In OPR benefited No One Except Improving Profits From Banks.
There is also some confusion about hiking up OPR now to check core inflation, when core inflation had in fact moderated without any hike in OPR, to 3.9% in the first quarter of 2023 as compared to the final quarter in 2022 of 4.2%. Further, there were two interest rate pauses of no hikes in OPR by BNM in January and March 2023, even though core inflation was higher at 4.2% during the final quarter of 2022 as compared to 3.9% in the first quarter of 2023.
There is no reason for BNM to increase the OPR now when the core inflation has been slowly reined in, but instead paused OPR hikes in January and March when the inflation rate was higher. Despite BNM not hiking up the OPR in January and March this year, both headline inflation and core inflation dropped to a 34-month low of 3.4% and 3.8% respectively in March 2023.
The hikes in OPR benefited no one except banking sector profits. Analysts at Hong Leong Investment Bank Bhd (HLIB) estimated that over a one-year forward earnings, a 0.25% rate hike would nudge up the banks' net profit by 3.7 % or slightly more than RM1 billion to RM30.07 billion from RM28.99 billion forecasted earlier. Have banks not earned enough?

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

10 Quotes

WORDS -10 QUOTES  The truth is more important than the facts. - Frank Lloyd Wright It is no good to try to stop knowledge from going forward. Ignorance is never better than knowledge. - Enrico Fermi It's a poor sort of memory that only works backward. - Lewis Carroll Drama is life with the dull bits cut out. - Alfred Hitchcock Curious things, habits. People themselves never knew they had them. - Agatha Christie The dead might as well try to speak to the living as the old to the young. - Willa Cather Success in business requires training and discipline and hard work. But if you're not frightened by these things, the opportunities are just as great today as they ever were. - David Rockefeller Today you can go to a gas station and find the cash register open and the toilets locked. They must think toilet paper is worth more than money. - Joey Bishop If you wouldst live long, live well, for folly and wickedness shorten life. ...
Post a Comment
Read more

Birds sing after a storm

  Rose Kennedy Birds sing after a storm; why shouldn't people feel as free to delight in whatever sunlight remains to them? - Rose Kennedy You may delay, but time will not. - Benjamin Franklin Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well-warmed, and well-fed. - Herman Melville There is no abstract art. You must always start with something. Afterward you can remove all traces of reality. - Pablo Picasso If you really want something, and really work hard, and take advantage of opportunities, and never give up, you will find a way. -Jane Goodall The trouble with jogging is that the ice falls out of your glass. -Martin Mull A desk is a dangerous place from which to watch the world. -John le Carre Rogues are preferable to imbeciles because they sometimes take a rest. -Alexandre Dumas As soon as you trust yourself, you will know how to live. - Johann Wolfgang von Goethe, Faust...
Post a Comment
Read more

Accidents caused by heavy vehicles are a growing threat to road safety

  The frequent occurrence of accidents involving trucks and trailers in Malaysia has become a pressing concern, highlighting systemic issues within the country's transportation and enforcement systems.  These heavy vehicles, essential for the logistics and supply chain sectors, have been implicated in numerous fatal accidents, often due to negligence, poor maintenance, or inadequate oversight. One of the glaring problems is the lack of enforcement on overloaded trucks. Overloading not only compromises the stability of these vehicles but also accelerates wear and tear on roads, increasing the risk of accidents.  Despite stringent regulations, enforcement remains inconsistent, allowing errant operators to prioritize profits over public safety. Driver fatigue is another critical factor. Many truck drivers endure grueling hours to meet delivery deadlines, often at the expense of rest and alertness.  Without strict adherence to working hour limits and proper monitoring me...
Post a Comment
Read more