Parliament told lower OPR increase main reason for ringgit’s decline

KUALA LUMPUR, March 11 — A lower Overnight Policy Rate (OPR) increase compared to other countries is among the main reasons for the ringgit’s decline, Second Finance Minister Datuk Seri Amir Hamzah Azizan said.

He also said that the main goal of the Monetary Policy Committee under Bank Negara Malaysia (BNM) in determining the OPR rate is to stabilise prices and ensure sustainable economic growth and not to control the ringgit’s exchange rate.

“If the OPR is increased to strengthen the ringgit, the nation’s economy will be affected and various parties, especially borrowers, have to pay higher interest rates,” Amir told Parliament in his winding-up address on the King’s speech today.

He referred to the Philippines, Indonesia, South Korea and India as countries that had chosen to increase their key policy rate by 200 to 450 basis points to a higher level than Malaysia.

“Compared to our country, the increase in OPR is only 125 points, from 1.75 per cent to 3 per cent.

“BNM, on March 7, still kept the OPR at 3 per cent for the fifth consecutive time,” he said.

Amir added that the significant difference in interest rates with the United States which is as much as 250 basis points has seen foreign investors move their capital out of the domestic market to markets that give higher returns.

On March 7, BNM’s Monetary Policy Committee (MPC) decided to maintain the OPR at 3 per cent as its meeting.

BNM governor Datuk Abdul Rasheed Ghaffour had previously said the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward and that the currency’s recent performance, like other regional currencies, was influenced by external factors.

Abdul Rasheed also said that at the current OPR level, the monetary policy stance is slightly accommodative and remains supportive of the economy.

He said the MPC continues to see limited risks of future financial imbalances.