The central bank’s monetary policy committee is facing pressure to hike the OPR to defend the floundering ringgit.
BNM governor Abdul Rasheed Ghaffour and the MPC face a test of their independence after Prime Minister Anwar Ibrahim said there is ‘no need to raise the OPR’.
The situation, however, is not unique to the ringgit. Neighbouring Asean countries recently surprised observers by raising their respective lending rates to support their weakening local currencies. He said the solution to the weakening local currency is to decouple it from the greenback, adding that the ringgit’s dismal performance was also due to the actions of the US Federal Reserve .
Section 22 of the Act explicitly says “the monetary policy of the bank shall be formulated and implemented autonomously by the bank, without any external influence”. However, Bank Muamalat chief economist Afzanizam Rashid does not think Anwar’s OPR statement will put undue pressure on the MPC. “BNM has been quite explicit that they are not targeting any specific level for ringgit. So, the decisions of other central banks may not affect BNM’s stance,” he said.
He warned that an OPR hike will dampen consumption and raise the cost of living for individuals and businesses.
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