BANK Negara’s (BNM) policy rate normalisation has not helped stem the ringgit’s depreciation versus the US dollar, said ex-finance minister Lim Guan Eng.

In a statement, he said the policy rate hinders business expansion and sustainable economic growth.

“Strengthening the value of the ringgit were among the reasons cited by those defending the 25-basis-point hike in the overnight policy rate (OPR) on May 3 by BNM.

“It is noteworthy that in the space of three weeks, the value of the ringgit has dropped from RM4.45 (versus the US dollar) on May 3 to RM4.58 today. To date, many businesses affected by the drop in the value of the ringgit are still awaiting BNM’s response,” said Lim.

On May 1, the Bagan MP urged BNM to maintain the OPR at 2.75 % at the following monetary policy committee meeting.

The DAP chairman said another OPR hike will again increase workers’ borrowing costs and reduce their disposable income.

In January, it was reported BNM was expected to raise the OPR to 3% from 2.75%, reversing pandemic-induced rate cuts.

Standard Chartered Global Research said robust growth and elevated and broad-based inflation are set to prompt further monetary policy tightening in Malaysia.

It said growth remains strong in the country, with the full-year 2023 gross domestic product expected to stand at 8.8%.

Lim said the OPR hike benefited no party except the banking sector.

Quoting a Hong Leong Investment Bank Bhd analyst, Lim said a 0.25% rate hike would nudge up banks’ net profit by 3.7 % to RM30.07 billion from the RM28.99 billion forecasted earlier.

“Have banks not earned enough?

“There is no reason for BNM to increase the OPR now when core inflation has been slowly reined in, (when it) paused OPR hikes in January and March when the inflation rate was higher.

“Despite BNM not hiking up the OPR in January and March this year, both headline inflation and core inflation dropped to a 34-month low of 3.4% and 3.8%, respectively, in March 2023,” he said. – May 24, 2023.