KUALA LUMPUR: While the nation waits to see if there will be another overnight policy rate (OPR) hike today or whether the current rate will be maintained by Bank Negara, the key question is, can we afford to have the OPR continue its upward climb?
The inflation rate, especially of food, rose by 7.3% in November, a steady month-on-month increase. This resulted in the prices of some items rising by more than 100% last year, leading to intense concern about food security.
Statistics Department chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the 7.3% increase in food costs was the main contributor to overall inflation, followed by transport, which rose 7.2% and resulted in higher logistic costs.
While various efforts, such as increasing the OPR, have been taken to control excess cash and normalise demand, the reality is that people are still waiting for the situation to improve, or at least be less painful.
An OPR increase can tighten cash flow for the average person, especially for those with a car or housing loan, or both.
Those who refinanced their loans or signed up for new financing in the wake of high OPR rates, especially for long-term commitments like housing or automotive loans, will find the situation particularly tough.
The same goes for personal loans. In short, loans cost more nowadays because the cost of money has increased. This has resulted in financial liquidity drying up for many.
According to the Executive Opinion Survey of the World Economic Forum’s Global Risks Report 2023, cost of living, rapid or sustained inflation and debt crises were identified as Malaysia’s top three global risks.
Principal Asset Management Bhd chief investment officer Patrick Chang said inflation levels had taken everybody by surprise, not only in Malaysia but globally last year.
He added that rise in inflation, coupled with the US Federal Reserve’s aggressive interest rate hikes, gave rise to volatile markets but the situation is expected to moderate soon.
Chang said there were many concerns regarding the nation’s economy last year but he expects a more neutral 2023.
He said as Malaysia becomes an ageing nation, those who still have the energy to work must try their level best to save at least a little every month for retirement. – Bernama