Bank Negara and Interest Rates

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hi,

Today Bank Negara decided to maintain the key overnight policy rate at 2%. It's been 2% since February 2009.

Also today, MIER forecast that the CPI for Malaysia would average 2.3% for 2010, and that GDP will be 3.7%.

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Well if you can borrow at 2% and inflation is 2.3% then better a borrower be.

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hi,

The base lending rate at Malaysian banks is between 5.25% and 5.5%. This week I saw a newspaper ad for a developer offering property loans at BLR -2.5% which would be 2.75%. Can't remember which one.

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hi,

Bank Negara yesterday hiked the Interest Rate to 2.5%.


13 May 2010 : Malaysia Raises Rate After Fastest Growth in a Decade.
"Bloomberg -- Malaysia’s central bank raised interest rates for the second time this year, judging that risks stemming from low borrowing costs are greater than any possible impact from Europe’s debt crisis. The ringgit rose.

The rate increase is a move “towards further normalization of monetary conditions,” the central bank said in a statement. “The stance of monetary policy continues to remain accommodative and supportive of economic growth.” Asian central banks are pulling back monetary stimulus as the region’s growth outpaces the rest of the world. Malaysia will be able to absorb increased volatility in its markets as a result of turmoil in Europe, and has the “policy flexibility” to act should global conditions worsen, Bank Negara Governor Zeti Akhtar Aziz said today.   

“Look for the rate rises to continue,” said Robert Prior- Wandesforde, an economist at HSBC Holdings Plc in Singapore who is predicting two more increases this year. Growth is “clearly sufficiently strong for Bank Negara to continue with its policy of interest-rate normalization.” "
http://www.businessweek.com/news/2010-05-13/malaysia-raises-rate-after-fastest-growth-in-a-decade-update2-.html

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hi,

I've been reading the comments in the newspapers about the slim chances of a rate rise. The comments were wrong.

I was almost right. Unfortunately I also thought that MAS in Singapore would take a neutral stance but it appreciated the S$. So, although I was right on one bit I was wrong on the other.

Result, misery.

Just goes to show, you can't be a little bit right.   


05 May 2011 : Malaysia Raises Rate in Surprise Move
Article . . .  KUALA LUMPUR—Malaysia's central bank unexpected raised its key overnight policy interest rate by one-quarter of a point Thursday, its first increase since July 2010, in a bid to contain rising inflation.

Bank Negara also raised the statutory reserve requirement, or the minimum amount of cash that a financial institution must place with the central bank, by one percentage point to 3%. This is the second increase in a row.

Nine of the 15 economists polled by Dow Jones Newswires predicted the central bank's rate-setting committee would keep the overnight policy rate unchanged at 2.75%, while six predicted a quarter-point increase to 3%. A majority said they expect a half-point rate increase by the end of the year.

"Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year," Bank Negara said in a statement.

The consumer price index rose 3.0% in March from a year earlier mainly because of higher food prices, compared with an average rise of 1.7% in 2010.

"Going forward, the assessment is for the Malaysian economy to remain firmly on a steady growth path, with growth improving gradually during the course of the year. Growth will be underpinned by the firm expansion of domestic demand," the central bank said.

End of Article
Source : online.wsj.com/article/SB10001424052748703859304576304650596353390.html

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I just checked my HSBC account online to see if my FD had rolled over on time. It had; and I was pleasantly surprised to find that the rate for the coming year is 3.15%. That's fine with me... but it could be that one could find a bit higher at another bank.
I had opened another, smaller FD at the end of May, and was given 3% p.a.. It's a 3 month term, and for a smaller amount, so I considered it to be not a bad rate. I'm thinking of just letting it roll over every 3 months, and if rates keep rising (a fair bet?) then it could track the rise close enough.

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hi,

I was in Maybank yesterday and the 12 month rate is also 3.15%.

I was also in CIMB and the 12 month rate is 3.30%.

A couple of months ago Standard Chartered was offering 3.75% odd for 3 month deposits. It was a special, limited, promotion.

Usually by the time I've noticed a special promotion, and had time to remember to do anything about it, it's already closed. So my accounts just get rolled-over at whatever the going rate.

Yesterday Bank Negara kept interest rates at 3% against the opinions of around 75% of analysts polled by Bloomberg. Just shows what they know. Still quite a few of them are predicting 50 basis points rise sometime over the next 6 months. T

Yesterday Bank Negara did raise the SRR to 4% which is the pre-GFC norm. As it's back to "norm" then any other move against rising inflation really has to be the lending rate.