Property Hunter Magazine August Issue 2014 | Page 51

Bank Negara has left the OPR
unchanged for the past two years.
The last revision took place in
May 2011, when the MPC decided
to increase the OPR by 25 basis
points (bp) to 3%.
According to economists, the
impact of an interest rate hike on
households will ultimately depend
on the quantum of the rate
increase.
A 25 bp increase to the
benchmark OPR from the current
3% to 3.25% – which is what is
widely expected by the financial
community – is unlikely to cause
any serious dent, economists
argue.
“Based on our assessment, many
households will likely be able to
absorb any increases in debt
obligations arising from a 25 bp
increase without experiencing any
severe circumstances,” Manokaran
says.
“And at a higher rate of 3.25%,
we think the OPR is still
accommodative to growth,” he
adds.
Zahidi concurs, saying, “The impact
will not be that significant although
consumers will still end up paying
slightly more for their mortgages
and future hire purchases.”
“But if another hike takes place,
pushing the OPR up by 50 bp
(from the current level), then the
impact on consumers will likely
be more pronounced and this
may lead to further moderation
in private consumption growth,”
Zahidi argues.
Economists in general do not
expect Bank Negara to take a too
aggressive stance on its monetary
policy, given the negative
implication on the country’s
economic growth as a whole.
Expecting Bank Negara to make
only gradual adjustments to the
country’s policy rate, RAM Ratings
Sdn Bhd head of research Kristina
Fong notes that “the central bank
has embarked on a very holistic
approach to their policy rate
decision.”
“Any decision made by Bank
Negara would have been well

assessed so as to avoid any
adverse impact on growth
sustainability,” she argues.

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