Overnight Policy Rate on 6th Nov meeting? Non-Issue.

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Remember at the beginning of this year, everyone was speculating on when would Bank Negara Malaysia (BNM)  increase its Overnight Policy Rate (OPR)? It seemed so important but the latest one was no longer so important. Perhaps because no one is expecting any further adjustments until Q3 of 2015? In fact, one reason why the stock market and even the currency is volatile or weakened was also attributed to this. It seems that if the rate is higher, more investors would be interested with Malaysia and perhaps the currency value can be strengthened too. Don’t read too much. There’s no such thing as BNM’s decision affecting the stock market or the currency. it will affect the long term growth of the country, of course but short term changes in the stock market and the currency? Sigh, now you know why I dislike speculators? Market is up, they have their reasons. Market is down, they have their reasons too.

Anyway, the following are some of the reasons why the Overnight Policy Rate is maintained at 3.25% by BNM. It said that ‘current stance of monetary policy remains accommodative and was appropriate in monetary and financial conditions’. What would make BNM change the OPR? They include outlook for domestic growth and inflation as well as destabilising financial imbalances. In fact it has already facotred in the higher inflation beginning this year and would continue to be above its long-term average next year due to domestic cost factors. Without doubt, one would be GST. It said that, “While the moderating trends will affect the overall growth prospect, the Malaysian economy is still projected to remain on a steady growth path,”.

In one sentence: The economy remains healthy enough, even with inflation and external demand going down, thus OPR would only be changed due to unforeseen circumstances. I think that unforeseen circumstances has to come from external.

Remember my thoughts earlier? Read here: No Adjustments to Overnight Policy Rate, so many so happy  My thoughts remain the same. Buying property should be based on many other real reasons but it should never be affected by a change of 25 basis points or even 50 basis points. Happy waiting for the next adjustment in OPR and happy investing.

written on 9 Nov 2014

Next suggested article: Bloomberg, Bank Negara Malaysia, rate adjustment and economic growth


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