FMT Interview: BNM unlikely to hike OPR to strengthen ringgit

The ringgit recently fell to RM4.80 to the US dollar which is its lowest level since the 1998 Asian financial crisis. As a result, there has been much speculation that the Central Bank may be forced to raise the OPR to strengthen the ringgit.

Benedict Weerasena, Research Director at Bait Al Amanah, expained in an interview with Free Malaysia Today Business that the continuous decline of the ringgit to a new all-time low could be seen as a factor pressuring BNM to raise the OPR.

“However, there is no guarantee raising the OPR will strengthen the value of the ringgit. This is because the main reasons for the ringgit’s weakness are external factors in addition to the long-term loss of Malaysia’s competitiveness.

“Secondly, there is a strong likelihood the US Federal Reserve (Fed) will cut interest rates towards the second half of 2024 as a result of falling inflation and slowing gross domestic product (GDP) growth in the US,” he told FMT Business.

This will narrow the interest rate differential and stem the tide of investors selling ringgit to invest in the substantially higher interest rates in the US, he pointed out.

Weerasena also said that raising the OPR will lead to “adverse domestic repercussions” including dampening consumption and raising the cost of living especially for individuals and businesses servicing loans, further worsening household debt.

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For the corresponding video, refer to FMT’s youtube channel here.

Photo credit: Free Malaysia Today