Property360Digest e-magazine Issue # 8 - 2021
The CME-BAA Macroeconomic Observatory ( MEO ), a joint platform promoted by the Center for Market Education and Bait Al Amanah , welcomes Bank Negara ’ s decision to keep the reference rates unchanged .
According to MEO , in the current scenario the efficacy of monetary policy in relaunching investment activity would be very limited . “ The experience from other parts of the world , such as Europe and Japan – explained Dr Carmelo Ferlito , CEO of the Center for Market Education – shows us that even decades of negative interest rate are not enough to stimulate the economy . Monetary policy is not the magic stick it is often believed to be ”.
In |
a |
complex |
reality , |
economic |
outcomes are the result of multiple |
factors , |
and |
first |
and |
foremost |
it |
should |
be |
stressed |
the |
uncertain |
nature of such outcomes because of |
the |
key |
role |
played |
by |
signal |
interpretations |
from the |
economic |
agents . |
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“ The key driver for sound growth is |
profit expectations ” – added Fariq bin |
Sazuki , |
an |
economist |
at |
Bait |
Al |
Amanah – adding that “ we should |
focus |
on |
creating |
the |
right |
environment |
to |
boost |
those |
expectations |
rather |
than |
simply |
focusing on monetary policy . If profit |
expectations do not rebound , then |
we will not have sustainable growth , |
no matter how low the interest rates |
are ”. |
Under this perspective , the MEO emphasizes that the gradual ease of the movement restrictions and the vaccine roll-out are playing an important role , but the sky still remains clouded by political instability and the lack of a general economic strategy which would also include the reopening of international borders .
MEO invites the government to do more in order to identify an economic strategy which is beyond the need of the day , focusing on a comprehensive plan to rebuild confidence in the country .
With regard to monetary policy , instead , MEO stresses the importance to remain on the prudent path and to recognize the role that an increased level of saving can play in soundly financing new investments . Savings are the real and sound source of financing for long-term investment projects and extremely low interest rates would discourage the accumulation of saving , while pushing for artificial credit and the potential risk of a boom-and-bust cycle .
Furthermore , a monetary policy which is too aggressive would drive up inflationary tendencies , deteriorating purchasing power and further discouraging saving .
Dr . Carmelo Ferlito is the CEO of SME - The Center for Market Education ( CME ) is a boutique think-tank based in Kuala Lumpur , Malaysia . As an academic and educational institution , CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics , grounded in the understanding of market forces . In order to do so , CME is not only involved in academic initiatives , but it organizes seminars , webinars and tailor-made economics classes for students , journalists , businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities . Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible . In this sense , we look not only at theoretical economics but also at policy making , with an emphasis on the unintended consequences generated by political actions .
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