Bank Negara will not raise interest rates aggressively to pre-epidemic levels as the OPR in Malaysia was 3%.
According to a news release from the President of Bank Negara, Malaysia’s economic growth in the second quarter grew by 8.90%, exceeding market expectations, with our economy growing by 6.90% in the first half of the year. The country’s economic growth for the year will range between 5.30% and 6.30%.
With the strong rebound in our economic performance in the second quarter, many would have predicted an aggressive interest rate hike by the National Bank, raising the overnight policy rate (OPR) to the pre-epidemic level of 3.00%. Norsanxia noted that the NB will adopt a gradual monetary policy.
The current OPR is 2.25 per cent and to adjust it to the pre-epidemic level of 3 per cent would mean a 0.75 per cent increase in the Bank’s interest rate. Nor Shamsiah said that another 0.75% increase this year is not in line with the National Bank’s monetary policy. So you can rest assured that the National Bank will not raise interest rates aggressively.
What is certain, however, is that the economic recovery will lead to inflation, which already reached 3.4% in June. Inflation will continue to rise in the following months. In order to discourage interest rate hikes, National Bank will continue to adopt a moderate approach to rate hikes.
Bank is expected to announce a 0.25% increase in September and another 0.25% increase in November, with an OPR of 2.75% at the end of the year.
