National Bank raised the overnight policy rate by 0.25% in May and July, and this adjustment has already made borrowers cry out that they can’t afford to pay more interest every month.
According to economists’ forecasts, serious inflation has broken out in countries around the world, and our country is not immune to it, and our inflation in the second half of the year is not optimistic. Our inflation in May has climbed from 2.3% to 2.8%, and the inflation data for June will be released in mid-July.
The Federal Reserve has raised interest rates by 1.50% in six months and will raise rates by at least another 0.75% during the year. In order to avoid capital outflow and support the Malaysian currency, Bank Negara must maintain a higher interest rate than the Fed. It is inevitable that the National Bank will continue to raise interest rates.
The general expectation is that Bank Negara will raise interest rates once more this year and at least once more next year. The overnight policy rate at the end of next year is expected to be 2.75% to 3.00%.
The NB will hold 2 more MPC meetings this year, which means there will be 2 more opportunities to adjust the overnight policy rate, namely on September 7 and 8, and November 2 and 3.
The Bank’s rate hikes will prepare the country for the next recession, and in case our economy is in recession again, the Bank will have room to boost the economy by cutting interest rates.
