pic by TMR
BANK Negara Malaysia’s (BNM) decision to cut the Overnight Policy Rate (OPR) by 25 basis points (bps) to 3% in May has led to a spike in retail loans after local lenders lowered their interest rates by 25bps.
Deputy Finance Minister Datuk Amiruddin Hamzah (picture) said the number of retail loans approved in May had increased by 13% from a decline of 1% last April.
He said this is shown in the higher sales of motorcycles and passenger vehicles over the same period, which rose 7.8% and 23.3% respectively.
Additionally, he said the lower base rates and base loan rates have contributed to lower loan repayments. In May, loan repayment stood lower at -6.8% against -0.4% in the prior month.
Amiruddin said the decline in repayment has a positive impact on private investment and public spending activities. He added that lower monthly instalments would add more disposable income and reduce the costs of doing business.
“The government is always taking proactive measures to ensure that the country’s economy remains strong and resilient to stimulate investment activities and domestic spending,” he told the Dewan Rakyat yesterday.
Amiruddin was responding to a question from Datuk Seri Ahmad Hamzah (Barisan Nasional-Jasin) who inquired about the effectiveness of the OPR rate cut on local investment and spending activities amid heightened global risks.
The central bank lowered the OPR to 3% from 3.25% previously, marking the first cut in nearly three years on downside risks to growth and potential squeezes in financial conditions.
The decision was made at the Monetary Policy Committee’s (MPC) meeting in May, where the ceiling and floor rates of the corridor for the OPR were correspondingly reduced to 3.25% and 2.75% respectively, from 3.5% and 3% previously.
BNM said the baseline projection is for the Malaysian economy to grow within the projected range of 4.3% to 4.8%. However, it said headwinds from increased uncertainties in the global and domestic environments, trade tensions and extended weakness in commodity-related sectors are expected.
“Although the tightening in global financial conditions has eased somewhat, heightened policy uncertainties could lead to sharp financial market adjustments, further weighing on the overall outlook,” the monetary authority said in a statement.
The MPC will be meeting again today (July 9). A Reuters poll found that BNM will likely hold its benchmark interest rate steady to assess the effects of a rate cut in May and give itself room for more easing if economic growth weakens later this year.