Queries arise on OPR hike come July 2011 policy meeting

Possible hike?...
Yeah believes that the current OPR level of the three per cent will not see a hike of 25bps in Bank Negara's next policy meeting in July.

With global economic uncertainties gazing upon rising inflation, it is anticipated that the nation's Overnight Policy Rate (OPR) will likely to rise b a further 25 basis points (bps) to 50bps in the near term.

Of course,there were several debates regarding the timing of the rate hikes prior to inflationary build-ups and concerns over the country's current gross domestic product (GDP)growth.

According to the comments by RAM Holdings Bhd's (RAM)group chief economist Dr Yeah Kim Leng, he believed that the current OPR level of three per cent would not see a hike of 25bps in Bank Negara's next policy meeting in July.
He believed that Bank Negara's focus on inflation would most likely shift towards the growth sustainability of Malaysia.

"As a result in the release in the oil stockpile and a further weakening in oil prices, inflation will most likely move at a moderate pace in the second half. As concerns over the current negative external economic conditions builds up, particularly in US and the EU (European Union).

The economic growth of Malaysia will be the first priority to the central bank.

Hence, OPR hike will most likely stay at its current level of three per cent.

Meanwhile, according to the comment given by chief economist of Malaysian Rating Corporation Bhd (MARC), Bank Negara will most likely 'put a brake' on its OPR hike for the moment, as the current GDP growth is hovering at four per cent to 4.5 per cent in the second quarter, and taking into the consideration of external factors like current global economic uncertainties. This of course, based on the possible inflow of 'hot money' from portfolio investments. At present, total foreigners' shareholdings in the Malaysian Government Securities (MSG)is at a historical high of 31 per cent of total outstanding MGS.

As a result, a massive inflow of 'hot money' would increase the risk of money flowing out of the country. Meaning to say, a huge outflow of money will cause adverse impacts in of the businesses as well as consumer's sentiments.
7GFN42WK3SF7