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Good news? BNM to cut OPR in November?

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BNM to cut OPR in November? This is a question which was on everyone’s mind for September but it did not happen then. Should BNM cut OPR in November then?

By the way, cutting Overnight Policy Rate is not considered a good news yeah, even if everyone seem to think that this is a positive thing. For the economy, if the OPR is cut, it meant that our Bank Negara (BNM) is expecting the economy to weaken further and thus will need that extra support via the interest rate. Lower rates would push more people to pull out their money and invest it into something else. This is part of the monetary policy which involves interest rate.

Fiscal policy would involve infrastructure, for example public transportation projects like the MRT. Both policies seek to help the economy to grow. Latest expectations from Standard Chartered Bank is that because of the rising COVID-19 cases, BNM may cut interest rates again during the November meeting.

BNM to cut OPR in November
Photo by Adil Alimbetov on Pexels.com

Article in nst.com.my . Standard Chartered said that there is a possibility for Bank Negara Malaysia (BNM) to cut interest rates again. This is because of the rising COVID-19 cases and the stalling of the economy. It also said that the Conditional Movement Control Order (CMCO) may shave 0.4% off Malaysia’s 2020 GDP growth.

It said, “Bank Negara may be less neutral now and we see a risk of the central bank cutting rates again in November. Nevertheless, we maintain our call for unchanged policy rates.” Standard Chartered said that because the rates are already at a historical low, further cuts may only have limited marginal impact and reduce future policy space.

It added, “The key will be the effect on consumer and business sentiment, but this will depend on the developing local infection situation. Further broadening or extension of the CMCO may result in a more pre-emptive decision by the central bank.” Do read the full article here: Article in nst.com.my

Do read the article carefully yeah. Standard Chartered said that current rates are already at historic low and any further reduction will not impact the growth too much. In fact it added that the low number may also reduce the flexibility of BNM for further action. By the way, I agree with the assessment. I also think we should not keep reducing the rates unless the economy is really looking real bad within the next 6-12 months.

Anyway, what’s the difference for an extra cut of 0.25%? Do refer below for a typical loan of RM500,000. The difference is RM60 per month. Actually, not a lot unless one is owning like many units. Then again, any savings are still savings.

Source: calculator.com.my

If you ask me as a home owner, of course I would love the rates to be as low as possible. However, I also would want the BNM to be sending the right signal to the market as well. If it’s really needed, then let’s do it. Else, let’s just watch and see. Sentiment need not be just because of interest rate alone yeah. It can also come from many other market signs as well. November is just a week ago, so just wait for the results then. So this remains a question. BNM to cut OPR in November?

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