Hike in OPR will not curb inflation, says expert

SHAH ALAM – The Bank Negara Malaysia's (BNM) move to raise the overnight policy rate (OPR) by 25 basis points to 2.25 per cent will not curb inflation, said an expert.

Deputy Vice-Chancellor for Research and Graduate Studies from i-CATS University College Kuching, Professor Datuk Shazali Abu Mansor said the move could cause a dip in the economy.

"As OPR rises, the cost of production will increase and supply will decrease which in turn would cause a higher inflation.

"It can potentially slow down the economy," he said.

Shazali said inflation occurs due to disruptions in the supply chain and not consumer demand.

"The current price is due to the supply price, not the demand. People are still spending the same amount.," he said, adiding that people's ability to spend as not increased as the economy has not fully recovered.

The increase, he said will be a cost to Malaysians who have to pay more loans and the beneficiaries will be the banks,” he added.