‘Keep OPR at current level’

MALAYSIA’S monetary markets are now at the most optimal, making any potential cut in the Overnight Policy Rate (OPR) from its current 2.00% unnecessary – at least for the next six months, Pas’ Central Economic, Real Estate and Entrepreneur Development Committee feels.

This view is based on several factors, key among them being the rate of loan growth and market price levels.

The latest Bank Negara Malaysia (BNM) data reveals that Malaysia registered a loan growth rate of 4.0% as of April 2020. This was supported in large part by the 4.7% growth in loans registered by the business sector, with retail loans to households registering a more modest 3.3% growth.

The overall Loans to Deposit Ratio (LDR) currently stands at 82.5%, with individual deposit rates registering 6.2% growth as of April 2020.

These figures are all the more impressive given the strain on the country’s economy as a result of complications brought on by the ongoing pandemic. We strongly feel, therefore, that it is imperative the OPR is maintained at current levels, as it is proving able to attract significant deposits while also proving accessible to those looking to take on debt facilities.

“Any move to adjust the OPR downwards therefore risks jeopardising the equilibrium that has been achieved.”

Malaysia’s current price levels are also helping the country’s recovery efforts. The Department of Statistics reported a 2.7% drop in the Producers Price Index (PPI) for April from the previous month, and a year-on-year decline of 5.1% – the most drastic 12-month drop since November 2015. This follows a similar drop in the Consumer Price Index of 2.7% in April 2020 compared to the month before, and a 2.9% drop from a year before, the most drastic since 2010.

These price levels will go a long way towards helping the economy recover. It is imperative, therefore, that the OPR remains at the current levels, in order to negate any potential deflationary pressures that might build in the coming months, as the country moves out of the Conditional Movement Control Order to allow businesses and companies to resume normal operations.

By maintaining it at current levels, Bank Negara will also be able to facilitate continuity along the entire value chain, as the economy seeks to recover in the second quarter of the year. It is a rare opportunity to support both constructive price levels and a healthy growth in loans and deposits rates, and one in which the committee is all for.

Contributed by PAS’ Central Economic, Real Estate and Entrepreneur Development Committee vice chairman Mazli Noor

source https://www.thesundaily.my/business/keep-opr-at-current-level-FE2547315