All,

1) IMHO, BLR will either stay the same or goes up. It will NOT go down. BLR is at the HISTORIC LOW now. So, it cannot go down.

So, how to determine whether BLR will stay or goes up: liquidity aka supply and demand of money.

A) Now, the bank has a lot of money sitting in the bank. So, the supply of money is high. But, if the RM keep going down versus USD, people may move the money out of Malaysia. So, BNM may need to raise the discount rate to keep money inside Malaysia. Then, BLR will go up.

B) Demand for money. If USA is going into recession and Malaysia is going into recession, nobody will be expanding their business. Hence, the demand of money is going down. If the demand of money is going down, how does that affect BLR?? And, lower BLR will not spur demand anyhow since people are out of job??

Watch (A) and (B) for your answers.

Dreamer

small-jeff,

<<During recession, most people especially middle class will try to save up their money in terms of cash.>>

1) Most recession, most middle class people get killed financially because they lose their job. Only a small minority has the opportunity to save more money.

<<In addition to improve Malaysian Trade Balance, shouldnt BNM be cutting interest rate instead of increasing it?>>

2) Only USA has that choice with LESS SEVERE IMPACT because it is the WORLD CURRENCY. For Malaysia, if we do that, the money will flow out and RM will devalue. Then, the cost push inflation will get worse.

<<but the latter would also depend on how well do other banks work with BNM..>>

3) No, it doesn't. We import fair amount of basic necessities. A devalued currency will raise the price of import.

Dreamer

small-jeff,

<<When there's a slowdown or recession, interest rate is lowered. >>

Let me REPEAT ONE MORE TIME. BNM will not lower the interest rate.

1) Interest rate is at the historic low now. Lowering it will not help to improve the economy.

2) People has MONEY. Aka, liquidity is high aka a lot of money in the bank. People just choose NOT to invest. So, lowering the interest will not lead to MORE INVESTMENT.

3) We are over-consumed now for the past 2 to 5 years. There are very little additional money to gain for consumption even with lower interest rate.

So, there is NO GAIN to lower interest rate even if we are in a recession. But, there is A LOT of problem to lower interest rate. So, BNM will not lower interest rate.

Dreamer

eric.tangps,

<<Raising Interest Rate now would effectively caused an imaginable horror to everyone as if petrol price increased is not enough.>>

Not everyone. For people that save 50% of their gross income, we are WAITING for this disaster.

Dreamer

http://biz.thestar.com.my/news/story.asp?f...18&sec=business

<< Forex loss dampens TNB quarterly results

It posts operating profit of RM942mil for first quarter

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) reported RM942.4mil in operating profit for its first quarter ended Nov 30 but after accounting for a foreign exchange (forex) loss of RM1.439bil, it ended up with a net loss of RM944.1mil for the period.>>


DannyOP,

Every time that BNM lower the BLR, RM will go down versus foreign currency. Then, you will have GLC like TNB with HUGE Foreign currency debt suffer huge FOREX loss. So, how long do you think that GLC can handle that??

TNB had a FOREX loss of RM1.439 billions in ONE QUARTER. Now, after the recent BNM's lowering of BLR, how much do you think that TNB will lose in the next quarter.

So, I will not be so confident that BLR will not go up in the next 2 to 3 years.

Dreamer

wodenus,

If people can loan to Singapore at 5% but can only loan to Malaysia at 3%, they will sell RM and buy Sin dollar. Interest rate of each country need to work in relationship with other country. The ONLY exception is country like China where RMB cannot be converted and used outside of China.

Dreamer