KUALA LUMPUR – The third consecutive hike of the overnight policy rate (OPR) this year will impact the low-income (B40) and middle-income (M40) groups the most, affecting spending power and access to loans, economists said.
These groups of consumers are already squeezed by higher prices of goods and will now find it harder to get by, Putra Business School economist Assoc Prof Abu Sofian Yaacob said.
“This development will also increase loan repayment, while the opportunity to get a loan will be difficult.
“This will affect people’s hardships, especially those in the B40 and M40 groups.
“In addition, price increases continue to occur because the value of the Malaysian ringgit continues to fall compared to the US dollar. Additionally, many raw materials and food are imported from abroad,” he told Getaran, The Vibes’ Bahasa Malaysia sister portal.
Last Thursday, Bank Negara Malaysia’s monetary policy committee (MPC) announced the third consecutive OPR hike for the year by 25 basis points to 2.50%.
Following the increase, the highest and lowest corridor rates for OPR were also increased to 2.75% and 2.25%, respectively.
The previous hikes were in May and July, each time by 25 basis points, first to 2.00% from a record low of 1.75%, and then to 2.25%.
The MPC will meet again in November to discuss the OPR.
Abu Sofian said Putrajaya needs to fine-tune some decisions on subsidies and cash assistance so that the lower income groups would not be overly burdened.
He said micro-credit loan facilities for these groups as well as youth wishing to venture into business should be provided, as it would be difficult for them to take out loans following the OPR hike.
“The OPR is used to deal with inflation and reduce cash liquidity in the market. However, we have to balance cash flow and economic vitality. It is not easy,” he said.
Another economist, Datuk Madeline Berma, said the group most affected by the OPR increase would include those who were previously given a moratorium on deferring loan payments.
They will feel the impact when repaying their loans at a higher interest rate.
“The cost of borrowing is now higher,” she said.
However, the OPR hike is also good for those with money to save. “The higher interest rate is a form of incentive,” Berma said. – The Vibes, September 11, 2022
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