Economist recommends impact study before OPR adjustments

SHAH ALAM - Bank Negara Malaysia (BNM) should maintain the current Overnight Policy Rate (OPR) but conduct a thorough impact assessment for three months before considering any further adjustments.

Economist at the Centre for Future Labour Market Studies (EU-ERA), Muhamad Zharif Luqman Hashim said the impact assessment would analyse the effects of the current OPR on various aspects, including people's income and businesses, particularly micro, small, and medium enterprises (MSMEs).

"By assessing the impact of the OPR on MSMEs, BNM can understand the potential consequences of increasing the OPR on their borrowing and investment capabilities.

"It will also provide insights into the broader economic and societal impact of such an increase," Muhamad Zharif told Sinar Premium.

On Thursday, the BNM Monetary Policy Committee (MPC) announced its decision to maintain the OPR at three per cent.

This decision followed the unexpected increase of the benchmark interest rate for loans and savings to three per cent in May.

Former Umno leaders Khairy Jamaluddin and Shahril Hamdan, expressed concerns about another OPR increase, citing external factors such as state elections that could have implications for the Unity Government.

Supporting this view, former Deputy Finance Minister Datuk Othman Aziz highlighted that an OPR increase would impact the financial status of average households.

"If the OPR increases by 25 basis points, it will also raise the OPR and the base lending rate.

"Consumers, especially those with long-term loans such as housing loans, will be affected by this increase.

"The people will bear the burden of increased loan costs and will have to pay more based on the new figures set with the OPR increase," said Othman.