Bank Negara raised the Statutory Reserve Requirement Ratio to 4 per cent from 3 per cent effective July 16th 2011, now there are talks that overnight policy rate (OPR) will also be increased, while some economist forecast an increase of 25 basis points, others even forecast as high as 100 basis points. So, to a layman, you and me and others on the street, what does this translates to? In short, a higher BLR (base lending rates for loans).in other words, the cost of taking loans and business costs tends to rise. Unlike Islamic Financing, Conventional Financing is tied to BLR's, so those who bought houses or properties, should brace themselves for an increased and higher monthly installment payments.
While the Central Bank/Bank Negara Malaysia will claim that these steps are neccessary in order to tame or fight the inflation, basically in Econ 101 this is what we call the contractionary Monetary policy, whereby steps are taken to decrease the amount of money in the economy, one could not help but feel that it is ill timed. While the rakyat is already facing a torrid time facing inflation, now it is made worse, they have to further tighten their belt, which is already tight enough. I sincerely believe there are other ways to fight the inflation, Monetary Policy is not the only tool, there are other avenues that are worth exploring and imploring.
Like I have been saying all these while.....plug the unneccessary leakages, we could and would be a better nation.The Government should always remember that the one that will be hit hard is the lower income and poor people, the blow of inflation is already severe, a double blow of insurmounting debts due to increased loan repayment would be devastative and have long lasting impact.
GOD have mercy and help us...
ciao..a.h.baharom
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