Bank Negara Malaysia (BNM) must not raise but maintain the overnight policy rate (OPR) at 2.75 % in the next monetary policy committee (MPC) meeting on 2-3 May 2023. As we celebrate Workers Day, the principal concern for Malaysia’s 16.8 million labour force are cost of living and income or a fair living wage. With many workers having individual bank loans, any increase in OPR would naturally increase their borrowing costs and reduce their disposable income.
The unemployment rate has receded to 3.5% or 592,000 workers in February 2023 from 3.6% in January 2023, indicating continued momentum for economic growth to generate income to match cost of living pressures. There is no need for BNM to raise OPR or interest rate now that the March Consumer Price Index(CPI) has eased to 3.4% from 3.7% in February 2023.
BNM had previously cited curbing inflationary pressures as the rationale for the 100 basis points increase in OPR last year. Now that inflation is slowly being reined in, there is a need to focus on generating economic growth. Sustaining economic growth is challenging in view of the current global economic downturn and expected recession in the United States.
The inability to sustain economic growth from raising OPR and the further burden of any higher financial costs may cause small businesses to close and cause unemployment. May Day celebrations today would be muted and meaningless if BNM increases the OPR at its meeting tomorrow.
The only beneficiary from increasing interest rates would be banks, helping to increase their interest margins and profits. BNM must demonstrate that it has a heart for the sufferings faced by workers by standing together in solidarity with our labour force.