I heard rumors of BLR is going to increase. Currently the amount is 6.6%. I do rough estimation if there are 1.0% increase. you keep on paying the current rate. your loan tenure will extend to another 2 years.

for example there are a time year back BLR 5.5%. now is 6.6%. what will happen if this keep on increasing. now with rumors of GST going wild. the rapid hike in cost of living. think of it if BLR increase further. what is the implication.

This post has been edited by toh2020: Jan 16 2014, 06:10 PM

it has been discussed in many other threads.
use search function.

where did u hear this news from? BLR is bound to increase sooner or later

i heard it from many ppl discussing at kopitiam. even also market places too. not forgetting housing developers sales at supermarkets.

well i searched through discussions. the happening does not corelate to current action by our beloved ruling govt. that is with implementation of GST. not forgetting rapid cost of living we are experiences now. this taken into account recent fuel hike.

http://www.theedgemalaysia.com/in-the-edge...-in-report.html

BLR will definitely go up.
In fact if you check BLR history for the past 10-20 years, it has been going up and down according to the economy, it was never static.

I heard BLR will reduce to coincide with recent reduction in kangkung prices

See Attached.
During the 1997,1998, 1999 when the economy is real bad, BLR was sky high.



This post has been edited by robert82: Jan 16 2014, 05:53 PM

you are right on track man. ballooning household debts could lead BNM raising benchmark interest rates.

we know well our govt always ask supplementary budget above allocation. which a bad sign for our economics.

to my experience when BLR goes up. it hardly goes down.



This post has been edited by toh2020: Jan 16 2014, 06:01 PM

do you have data from 1980 - 1988. i heard also many said there are mid year crisis in the 80's decade. many ppl are out of job and recession follows... thanks.

the only worry everyone discussing is 2014 - 2015. there will be a revision by BNM on current BLR of 6.6%. the OPR also be revised.

http://www.blr.my/Historical%20BLR%20Graph.htm

thanks man, the figure says it all mid 80's decade crisis to be exact.

The recent devaluation of ringgit & sky rocket good price, don't think BNM can further delayed rising BLR unless they wanna another crisis.

Rofl

we wishes BNM not to raise the BLR nor delaying it.

when times are desperate and there are shortage in cashflow. BLR increase is beneficial. in a way they banks increase their cash reserve for loans. it encourages saving when ppl knows bank are offering good FD at 7% - 10% per annum. in order for banks to repay their depositors with sustainable profits. they needed to charge higher lending rate on loans more than FD rates.

2014 is bad year most ppl will be tightening their belts due to many uncertainties. well drastic measures comes to drastic action. eventually BNM will increase the BLR due to preassure from many quarters.

so it boils down to how the ruling govt manage the nation financial affairs. with the ever increase in cost and the drastic need to supplement budget. this is danger for house owner, businesses and investors.

the thing is when the owner cannot paid up. they financial sectors involved have rights to forclose their properties/commercial premises and sub-sale with auction. ppl will get laid off from thier jobs. multinational companies will move away from our beloved malaysia. more bankcruptcy that comes along with NPL that inturn affect the banking sectors ans socio economics of the nation.

it is also an acid test for najib's administration. hence we should look forward what's next in 2014. the discussion should be base on current real time issue how it will eventually affect us all.

You people probably too young to remember

That was the time when ASEAN currencies were under attack. Value of RM drop like mouldy peanuts.

One of the defense method is to increase the interest rate high-high to make the RM attractive.

The finance minister used this method. That why got spike in rate. At the peak it was almost 12%, if I remeber correct.
The rest is interesting history.

This post has been edited by Fazab: Jan 16 2014, 09:18 PM

Our ringgit is badly devalued now, Singadollar already at 2.6 if nothing been done late 90's will revisit, if currency keep only falling many investors will cabut.

BLR is definitely expect to increase, just matter of time.

BTW no need yi lou mai lou, jual minyak, we wasn't born yesterday, we know what happened in late 90's.

Just for fun-lah. No need to nitpick. Or will really grow old fast-fast.


What happening now is our own doing, so to a certain extent can control, up the BLR a bit a bit.

What happen in 90's was an concerted attack. No chance to do anything. Just open eye watch people die.

The after effects will be same, BLR goes up, bubble burst, but will be less drastic, less painful.

of course lar we got so many foreigner working take our monies back home. sure devaluate one. to them they just go back homeland enjoy.

for the locals will have to bear the impact.

what will happen if BLR increase? bank will change the monthly payment amount? or extend the loan tenure?

Sgd 2.6. Hav u make a move??? In fact I did. Anytime is a gd time to buy currency. I started bout 10 yrs ago. So I'm pretty happy to hav sgd even at 3.5. Huat ar.

Btw, anytime is a gd time to buy prop too. I started 20yrs ago. Tats y I ll b happy if prop hav another round of boom. BLR increase??? Np la. More than half of the props r settled with rental >10% on cost price. Best 1 slightly >20%. New 1 of cos not so high but it's taken care of by rental in the whole portfolio.

Bro, no need to b afraid of Econ up or down. Trust urself, do it ur way. U ll feel beta if u dun think too much.

And tat doesn't mean u can do silly thingy la.

your mthly payment will never change. this is new rule from BNM. but with higher OPR or daily interest. your principle reduction will be much lesser. hence your loan tenure will be extended to so many years to come...

for home loan, every ringgit outstanding is calculated in daily interest.

if u want to pay higher mthly installment. you need to go to your bank headoffice and apply.

This post has been edited by toh2020: Jan 18 2014, 10:58 AM

Are this going for apply for the term max loan of 35 years? let's said what happen if some just get a loan approved at 35 years max and the next month BLR increased?

but this will make our loan neverending rite? If payment amt < interest charged so loan balance keep increasing.

Oh no......Are you sure even with interest rate increase by >3% ?

If like that, flippers will not be affected. So no more dead chicken even if interest rate increase

the 35 max is safeguarding for banks vs borrower age/health factor where they can work and earn.. they banks are well aware tenure will be prolonged. taken account BLR increase and BLR decrease will be reflected in your yearly statement. so if BLR keeps going high. the sad reality we have to pay longer before reaching financial freedom.

i did talk to elderly ppl on this. many who opt 30 year loan ended up to nearly 40 year payment. the advice if u got some money like bonuses. might as well do principle reduction payment if u are under flexi-loan.

This post has been edited by toh2020: Jan 18 2014, 11:59 AM

it will be accumulated and charged on daily OPR interest. henceby how your tenure increases.

we can only keep our finger crossed. this year consider an acid test for najibs administration. there are many news going on our nation overspend and bla bla bla. but in reality things are going up and cost of living goes sky rocket high. the past will revisits again sooner.

This post has been edited by toh2020: Jan 18 2014, 12:04 PM

Sure got this new rule? When I took a loan last year with 18 years tenure (max because of my age), the bank manager warned me repeatedly that if interest rate goes up, my instalment will go up also. They will not extend my tenure because oledi max out.

This post has been edited by Fazab: Jan 18 2014, 12:20 PM

for my case my mthly installment had not changed. there is this minor word clause by BNM. cause my tenure is 15 years. i do rough estimation if 1% BLR increase it will add 2 year to my tenure. if it stays the same till end of tenure.

just watch out for yearly accessment charged to your loan acc. it will also increase your overall interest.

so when i got my yearly bonus. i just dump rm2k yearly as principle reduction.

forgot to add when i secure my loan BLR that time was 5.55%

This post has been edited by toh2020: Jan 18 2014, 01:07 PM

It depends on person bro...u doing well cos of careful, prudent planning n prolly buy props with higher % of down payment...others that follow with 0-5-10% downpymt with little backup cash n buying expensive house with low rental r gonna suffer....

civil unrest can cause interest rates to lower har.. no wonder the trend these days. people are keen to do mass gathering "turn padang"...

read for yourself...

http://loanstreet.com.my/learning-centre/b...crease-decrease

what toh2020 said is true, case by case basis..

some bank will notify borrowers, while mostly dont..

i obtained 2 loans during 2009 when BLR was all time low.. since BLR has increased last few years, my repayment has not been revised, meaning more towards interets and less paying down the loan.. its not entirely bad news if you buy for rental income as cashflow and COCR remain positive and good..

but not good for those ownstay, meaning your repayment might be never ending.. borrowers have to keep track with BLR themselves and notify bank to revise the repayment..

For flippers, good news and not too good as well.. good news is that it will not affect your holding power if bank didnt revise your repayament, you still pay same amount everymonth... but your prospect buyer might have difficulty in getting loan due to higher BLR rate.. end up you might need to hold longer, and service more interest..

cheers..

This is also referred to as the "Deflationary Monetary Policy" in economics.

20 years ago is a good time to buy property. U made the right move and you are earning the rewards from it. But the issue here now is, is it the right time to buy now when it is in skyrocket high prices. Would you buy the same property that you own now at the price you planned to sell now (in a situation when you don't own the property and is just earming just enough to feed your family).

Are you sure we need not be afraid whether the economy goes up or down? Are you in business? If economy suffers, so will your business. If economy is bad, who would be able to afford to buy or even rent from you? Would you be rather keeping your unit empty while generating no income?

There a a lot if implications from the economy . A lot of people would suffer when it goes down. Think again.

Thread base on blr rumours again. Zzzzzzz ....

Boss to answer some of ur Q, yes I ll stil buy props similar to my previous purchase 20 yrs ago. In fact I did for the factory next to my biz add and tat answered ur next Q. Econ down not necessarily put u on grd if u r well prepared. Biz slowdown is a norm as I have been thru 97, 02, 07. Biz itself went thru even 84. So gd or bad u need to overcome. And actually u learn to defend it after every crisis. If one is not ready for it, the onli word to tell is sorry.

I'm practising buying props every now n then. It might not b accurate to follow my pov of buying even during bad time but it does proved a bargain buy for 3 of my 97 purchase n 2 of my 07 purchase. Hard to get loan but higher down payment does help. In fact with lower down payment now u ll find it scary to service the installments cos the figures r much higher and if u look carefully the interest part is not encouraging. So advance payment is a must with discipline to make sure the tenure is shorten. Tats my 2 cents.

rumours or ouch ouch is reality to come by this year.... it's best to share so everyone will be on guard n make neccessary plannings or preparations.
http://www.freemalaysiatoday.com/category/...lr-by-end-2014/

Zeti: New framework for BLR by end 2014
The cost of funds for banks is based on the overnight policy rates (OPR) that BNM monitors. The OPR, however is likely to rise next year from the current 3% to 3.5% in a bid to contain inflationary pressure on Malaysian economy....

if opr 3% ~ 6.6% blr. then opr 3.5% =???% blr

This post has been edited by toh2020: Jan 19 2014, 11:07 AM

candidate age factor and health records does play a part. in decision making for approval. these are risk factor. the banks are very careful in case to case basis. in all cases conditions set are tailored to best interest of the banks.

This post has been edited by toh2020: Jan 19 2014, 04:49 PM

You have the experience and you have a point there. No matter what, we have to be prepared for the worst. But right now we are talking about prices which is way beyong affordability. It is different as maybe when you bough properties, prices we were talking would be around Rm100k to 300k. Now we are looking at around Rm600 to >RM1 Mill in prices. Could you imagine if one were to be so highly in debt for example, servicing a Rm1Mil Loan and that someone were to loose his source of income? Its not that the Rm1 Mil loan would be so easily servicable. Nowadays, our salaries are of the same amount 10 years back. But properties prices has increased ten folds. So would it be advisable to just buy what you need and definately buy within your means so that even if the economy goes down, you could still afford to service your loan and not become a bankrupt.

The main question again is, is it the right time or not to buy now. Times now are properties prices at at the peak (at the moment), Economy hsas slowed down tremendously, Government and leaders has no apparent idea what they could be doing to improve our countries' economy and the worse part is banks are getting very stringent on their loans with the high NPLs.

make it simple..

the rich gets richer (anticipating property bubble to burst. the faster the better. buy forclosed properties at undervalue prices. sell them of good reasonable prices for handsome profit when market regains momentum)

the poor gets poorer (when will we ever get a home sweet home. price hike is inversely proportional to income. so the goals are beyond reach)

the mid incomer caught in dillemma between 2.

For own stay go ahead Buy,
For investment long term Buy,
For flipping you can forget about it.

U need to accept the fact you have been downgraded so don't expect you can afford what your bros/sis or Senior can 3-4 years ago.
Imagine this if u earn 10K per month now equal to 5K 3-4 years ago, 7-8K equal to .3-4K, below 5K then better don't dream buying house or you going be in high risk.
U have the choice to choose a reasonable size house but expect far far away paying lot's of toll & petrol plus spending hours to & from work place, or U can accept pigeon hole size house closer to city.
Sorry to says our economy r managed by businessman now particularly developer, they can decide country policy. (just look at min wages & Iskandar foreigners cap on properties).
Just pay the price & hopefully u can complete the mortgage without the need to go AKPK...lol
Don't eat Kai Lan or Sawi switch to Kangkung maybe can save some extra for house fund. ..wakakaka

Your salary is the same now as 10years ago? Really? Even Indon maid earned more in Malaysia compared to 10 years ago.
Also I wonder what residential property increased 10x over 10years in Malaysia

This post has been edited by Minolta: Jan 20 2014, 07:04 PM

Actually the difference in salary 10 years ago is really marginal, graduate salary is like 10-15%, U r right foreign labour actually enjoy more increment than local, that why I agreed with Tun Mahathir that FDI from property development actually bring more benefits to foreigner than Malaysians ib general.
As for properties price I think 10X is a bit over exaggerated, 3-6X more likely.

But if u talk about money value base on inflation figure, he is not totally wrong by saying 10% salary adjustment & 10X house price, 5K salary 10 years ago allowed u to live a decent living but 5K today mean living in real budgeted life & anything below that meaning u live as poor fellow in the city.

given them credit - top skills with spending, wasting and taxing, consultant fees, task forces and more taxes. it sucks to be a tax payer these days...

oh... usd today 3.32, if 3.4, 3.5, will they raise rates?

some people say we have usd100 billion reserves, no scared. but when will they use all that to keep rm less weak? do they actually have that reserve or just smoke n mirrors like usually?

tot our current beloved ruling govt already had Government Transformation Programme (GTP), which includes monitoring the performance of ministries and six national key result areas (NKRAs) through Key Performance Indicators (KPIs).

by then things should be better or otherwise?

we know those under GTP oversee the overall govt KPI are highly overpaid compared to ministers.

p/s: the banking sector predicted 2014 OPR will go up from current 3% to 3.5%. i presume BLR to raise above 7.7%.

that would be a killing... no meh?

even from current BLR 6.6% to 7% already a massive raise!

seriously to be honest if you are to do the same job for rest of your life. u be paid the same amount or lesser even for years to come. basically it comes down to demand and supply. if the company willing to keep u. that's fine, consider yourself lucky. when they opt for automation u are consider redundant and out of the job. basically it comes down to one's own mindset.

when you see yourself doing above more than you are paid, keep learning and improving. the company management does not give a damn about been appreciative to your efford. instead of finding justification to brainwash you into thinking this is what u deserved. henceby taking all your credits to promote themselves. to keep their jobs safe. dumping their workload on you taking things easy themselves. it's your own wisdom and decision either to move out for better prospect. or perhaps stay down being obedient under suppression.

Like

this is anticipated by major banker. eitherway it's BNM decision give way to them or the rakyat.

This post has been edited by toh2020: Jan 21 2014, 12:21 AM

As I mentioned before, the government is adopting deflationary monetary policy now. Being so, measures by increasing BLR and so on and so forth would discourage spending and in the long term curb overspending beyond means and debt ratio as well as npl and in the long term help curb inflation as well.

I always like Crystal ball expectation and I do believed the blr will raise till 7.7% before 2015 .

For those taking Dibs and fixed BLR with 3-5years lock in package ppls , definitely hope that the market slow down and BLR raise sky high in this period . Don't you ? Flippers?

No offence in all time , I'm personally thinking of the top5 property talk ddd campers in this forum , actually is the 1 who going to flip the most -.-a

It's so true and the fact is some nicks r fr the same person. U can c lotsa old timers with new nicks here arguing the same old topics.

http://www.themalaysianinsider.com/busines...eady-next-week1

My friend's comment :

i don't think it come down. if you average up the figures. the BLR stand at 2.995% which still the same 3.0% currently. this why BLR still stood at 6.6%.

any increase of decrease of BLR are dictated by overall OPR movement. the profit and lost are also taken to consideration. so the financial institution can keep afloat.

Yes it didn't come down. That is all because BNM wants to maintain it by intervening the market. That is what the link is saying.

Whereas the FD rates has come down from 4.xx% to 3.xx%. Clearly indicating banks has too much money in the market. And the banks taking cheaper deposits while lending at same BLR, they are making even more money

as previous posting 3.6% set aside for bank operational cost. with profit margin of 0.6%. if they give BLR (6.6%) - 2.4% = 4.2%

make sense FD went down to 3.xx% as u said. we know low FD discourages savers. if they banks give u better FD rate. hence why banks must charge more for loans. there has to be a balance which BNM are to moderate. however stiff competition among banks are good too for consumers.

This post has been edited by toh2020: Jan 25 2014, 03:15 PM

No lah. When FD at 4.xx%, housing loan is BLR - 2.xx%. Credit card loan at 18%pa. Car loan (new car) 2.x%-3.x%

Now FD at 3.xx%, housing loan still same rate. Credit card also same rate. Car loan also same rate. Bank's margin is larger

Now bank's loan affected by rulings. Inflation affect spending. Banks got excess money. BNM has to absorb the excess. That is what the link I provided is saying. So that BNM's OPR is maintained at ~3%. If BNM don't intervene and let market decide the rate, BLR should have come down. Along the way, banks make more money. That is what my friend's quote says.

the contribution factor are inflation. where goes with our purchasing power? even SG dollar fares better than ringgit. inefficient money management by our govt. always ask parliment supplementary budget and mismanagement. the growing national deficits we lose out paying interest to dev nation like japan for example.

the very high presence of foreigners/illegal aliens in our streets/city/town/factories. they work and take huge amount our monies out back home. so what can you say?

we cannot compare the past with current and future times. we can only look forward. entrust our hopes to ruling govt majority vote for betterment.

This post has been edited by toh2020: Jan 25 2014, 03:44 PM

if u are into property buying. be always prepare for good and bad times. be alert always.

if someone not being promoted for 3-4 levels up from day 1 he/she joint the company for 10 yrs, then somthing wrong alrdy. Better move out to find greener grass... ideally one shld chg job every 4-5 yrr for career dev.

Absolutely nothing we can do. And we can't do anything on monetary policy too.

u need not change job frequently. otherwise u be label as "leaping frog" in the market. if the same company offer you prospect. well make do with it. if other co. is paying fair much better benefit. there is no stopper one opt to move on. the decision always yours.

we can do our part as citizen. just hope and pray lor.

unless you are capable to consider migrating out.....

This post has been edited by toh2020: Jan 25 2014, 03:59 PM

Changing job evry 4-5 yrs once shld not labled as leaping frog la...! I refering to someone joint the company as clerk/executive/engineer.. and 10 yrs later.. still keep the same position or only 1 level up la!

when you change. u should had next level of experiences add value for new employer. this is on your bargaining portion for better perks.

it depends on individual preferences. some prefer stay the way they are. they work well with employer. the employer let them be. so as long they do their work and deliver.

Lets hope this will be another toll hike thing, KIV due to too much noise from public

Your opinion and insights does not apply to those working in the oil and gas sector like me. Sorry dude.

you have your point here.

are u saying your co.
1. have a very high turnaround of staff?
2. too much excess of politics and discrimination affecting staff moral.
3. major reshuffling to downsize organization structure.
4. closure of business unit/cost center which they see deem not profitable.
5. downsizing in way centralize core operation. where branches had to shutdown.
6. outsourcing.

This post has been edited by toh2020: Jan 25 2014, 06:52 PM

these are indeed risk factor for those in employment. how one can service their home loans in difficult economic times.

scenario:

what if sudden boss comes to you. ok you mr. or mrs. so and so, today is your last day. here is your 1mth - 3mths pay cheque (depending on your termination/resignation terms).

BLR go up monthly payment also up depending on banks. you are in such scenario and suddenly got a bank letter revise a higher mthly payment rate.

The above points sound more like those manufacturing, finance, construction, banking, hotel, logistics, retail sectors. Again, apart from point no.1, the rest are not applicable.

BSN just announced it increased its BLR to 6.6%. Why did they do this? There was no change in the OPR by Bank Negara, right? And I thought the current BLR is already at 6.6%?

This post has been edited by lioncarlsberg: Jan 25 2014, 09:33 PM

if your referring to those who hop every 6 months, then they can be called leaping frog without proper specialization.

every 4-5 years is the ideal case for <40 years old or so. Say your current job grade is lvl5, and you know it takes ~5 years to level up. You can hop to another RELEVANT company to receive that higher job grade + salary markup + new experience. And when time comes, you may opt to hop back to your original company, and the "old" workers will realise how you manage to be in so much higher grade than them in the same time window. Its pretty common, like example my CEO is only 40 years old, numerous experience in all other competitor companies and had experienced in my(his original) company years back. The added value in him is high. Its a huge O&G mnc btw.

got such thing as loan tenure increase? not pay higher installment meh?

it will go up. but if it goes up like 1-2%, many will declare bankrupt

Current BLR is 6.6%. so if BSN anouncing 6.6% consider no change.

u don't really learn from 6mths.. but at least something within 1 year. those who opt to hop. they usually wait for bonus to be credited to acc. once confirm off goes resignation letter...

if 4 - 5 years in big co. doing routine kinda job. u won't go anywhere. when everything you do is defined and process oriented. but u can do more taking own initiative, to prove yourself to your bosses. take every chances to take up higher level of responsibilities. learn from there. that sufficiently help u to move out. when u are back out there. u became your own former senior's boss...

when i got my loan BLR was 5.55%. now is 6.6%. i received yearly bank statement that says revision of monthly installment. to date i still pay the same amount in monthly payment. despite the term and condition written at bottom.

this is case to case basis. my bank does not increase mine. but they purposely intended increase for other individual.

for my case their intention is drag the installemt longer make me pay more interest...

INTEREST RATE
KINDLY NOTE THAT WE WILL REVISE YOUR MONTHLY INSTALLMENT ACCORDINGLY IF THERE IS A CHANGE IN THE INTEREST RATE AS A RESULT OF MOVEMENT IN BLR OR INTEREST SPREAD.

10 years same company with no promotion & increment and yet dont jump is possible in 1 logical scenario....when one is the CEO/boss.

not the top lvl.. is bottom lvl... still keep the job title with minor yrly increasment ... poor perf and don't want to move... MC n EL evry now and then

http://www.theedgemalaysia.com/business-ne...eplace-blr.html

PFR to replace BLR

"It stressed that the proposed changes would not have an impact on effective lending rates charged to retail borrowers. Effective
lending rates are determined by a range of factors, including the bank’s assessment of a borrower’s credit standing, it pointed out.

The new reference rate will be used for the pricing of new retail loans and the refinancing of existing loans after the effective date of the
new framework. Existing loans will continue to be referenced against the BLR."

BNM is encouraging bankers to setup the rate looking into their operation cost and other attribution. the way is many different banks will have different ways in managing their resources and cost varies.

banks with much surplus in cash flow will lead the way. that eventually depriving other banks by giving more attractive loan new packages. as an outcome there will be mergers and acquisition in later time. sooner later consumer will have less choices to go about with loans. whereby the PFR moreless encourages monopoly.

by that time Tan Sri Zeti would had jump ship...

Better Refinance to fixed rate packages.

I am interesting to know PR1MA house buyers go with BLR or PFR?

Actually they have to pay more interest in long run and lots of T&C. With that cost to by stripped version house, look for old house will be better sometimes.
Like my mother just bought a 30 years old house for rm22000, spend another rm20000 just to recondition the house. Total cost is just rm42000 and way cheaper.

what is PFR?

RM 22K house !! which kampung ??

U mean RM 220K ??

Seremban, Rasah Jaya. Bought from the owner direct. If buy from agent is about rm80000.

BLR increase will not impact the BBB mode now. Buyers still can absorb BLR increase.

A Banker from HLBB told me the BLR will increase on July..

When CPI drop, interest rate should drop also right?

Yes, when CPI drops, inflation rate drops, interest should drop too. Read here for more explanation: http://www.investopedia.com/ask/answers/12...elationship.asp

i don understand.. it know me.. i don know it..

KUALA LUMPUR: Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points to 3.25% on Thursday, the first time since May 2011 with economists expecting the rate hike to address the potential rise in financial imbalances.
Alliance Bank Malaysia chief economist, Manokaran Mottain said the hike in the OPR was a "pre-emptive measure to prevent further disproportionate risk taking as well as reducing asset price misalignments".

"While the central bank in previous instances had preferred to make use of macro prudential tools in reducing asset price bubbles risks, the rate hike will likely deliver greater traction in averting any excessive leveraging activities," he said.

BNM said the decision was made at its monetary policy committee (MPC) meeting as the latest economic indicators pointed to continued strength in exports and private sector activity in Malaysia. It also expected Malaysia's overall economic growth momentum to be sustained.

"The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 3.00% and 3.50% respectively," it said. "At the new level of the OPR, the stance of monetary policy remains supportive of the economy."

BNM said going forward, the overall growth momentum was expected to be sustained while inflation has been relatively stable.

"Exports will continue to benefit from the recovery in the advanced economies and from regional demand. Investment activity is projected to remain robust, led by the private sector."

"Private consumption will be supported by stable income growth and favourable labour market conditions. The prospects are therefore for the Malaysian economy to remain firmly on a steady growth path," it said.

BNM said inflation has been relatively stable as the effects of the price adjustments for utilities and energy continue to moderate. Demand driven inflation remains contained, it added.

"Looking ahead, inflation is, however, expected to remain above its long-run average due to the higher domestic cost factors.

BNM added amid the firm growth prospects and with inflation remaining above its long-run average, the monetary policy committee decided to adjust the degree of monetary accommodation.

This normalisation of monetary conditions also aims to mitigate the risk of broader economic and financial imbalances that could undermine the growth prospects of the Malaysian economy, said the central bank.

Alliance Bank's Manokaran said the MPC's decision to raise the OPR by 25bps was within expectation as well as market consensus.

He pointed out that since the previous MPC meeting in May, financial markets had been influenced by this expectation.

The ringgit rallied to RM3.172 against the US dollar on Wednesday, up 2.06% gain. At the close on Thursday, the ringgit was trading at RM3.182.

"In the meantime, the rise in OPR will likely improve Malaysia's attractiveness amongst foreign investors, leading to stronger capital inflows, lower bond yields and an appreciating ringgit.

"Looking ahead, we do not see the recently announced OPR hike to be the start of a monetary tightening process. At the new rate, the OPR remains accommodative of growth. In this regard, we expect the OPR to remain unchanged at 3.25% for the rest of 2014," he said.

Link : http://www.thestar.com.my/Business/Busines...-rate-by-25bps/

increased d...