KUALA LUMPUR, June 12 — The Overnight Policy Rate (OPR) is likely nearing its optimal level based on historical factors where the rate hovered between three per cent and 3.25 per cent, an economist said.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said although the past history could be the guidance for determining the OPR number, no one could really predict the suitable rate going forward.
“In reality, no one can really tell what is the optimal level or what economists called it as a neutral rate but at three per cent we may have reached or nearing its optimal level.
“When we saw last year our economy was growing at the rate of 8.7 per cent, then we know the economy has recovered and having the OPR at a too low rate could actually bring more harm to our economy,” he said on Bernama TV’s The Brief programme today.
According to Mohd Afzanizam, Bank Negara Malaysia, as the central bank that oversees the country’s monetary policy, has been raising the OPR in order to build a buffer zone in anticipation of any economic calamities.
“In the past, we saw the OPR was cut from three per cent to 1.75 per cent in 2020 simply because we need to deal with COVID-19 but thereafter when the economy started to recover, the OPR was raised again by 125 basis points until now,” he said.
Going forward, the economic uncertainties will always be there and the International Monetary Fund (IMF) has explicitly mentioned that the possibility of recessions in developed markets is something that can’t be ruled out.
“There could be a possibility that the OPR could be cut again at some point in the future but not now,” Mohd Afzanizam added.
— Bernama
