DAP welcomes Bank Negara Malaysia’s (BNM) decision today to maintain the overnight policy rate (OPR) at 2.75 %, offering businesses and bank borrowers much needed respite from interest rate hikes to tackle the expected economic recession in the United States. Further the formation of the new unity government under Prime Minister Anwar Ibrahim since 24 November has also bolstered investor and market confidence, as evidenced by the marked appreciation of the value of the ringgit against the US dollar from RM4.75 under the previous government to RM 4.32 today.
The principal reasons for interest rate hikes stem from the need by Bank Negara to contain inflation and also restrain the rapid descent of the value of the ringgit, which dropped to a record low against both the Singapore and US dollar under the previous government. Clearly, fears of inflation and a spiralling slide in the value of the ringgit have receded under the new unity government which is seen as a much safer bet for investors, horrified at the prospect of an alternative incompetent, extremist and racist government.
Bank Negara had carried out a series of interest rate or OPR hikes last year by 1% due to the previous failures to check both inflation and the rapid slide in the value of the ringgit. Despite nearly RM 600 billion being pumped in by the Muhyiddin administration, economic growth remained anaemic, raising doubts as to the efficacy of the public funds spent.
By halting interest rate hikes, the government will have an opportunity to address slower growth brought about by the US recession. Restraining borrowing costs will help to ease the cost pressure on individual and bank borrowers and boost higher consumption spending. The halt in interest rate hikes is a small Chinese New Year ang pow given to borrowers and hopefully will allow the new unity government to give its full attention to reduce business costs whilst generating more business opportunities.