Malaysia is one of that doesn’t really tend to raise the interest rate, and more particularly the key interest rate. But at times, this can happen, and it actually ended up happening recently. This makes Malaysia the first country in SE Asia that ends up tightening its financial policy.
The increase on its own is not that large. It’s around 3.25%, and the previous rate was 3%. So, it’s not a huge bump. But it is a bump, and one that you need to take into account in here. The central bank has tried to implement this for quite some time, which means that it has been in the works for quite some time.
The problem for most people is that this increase doesn’t reflect the buying power. Sure, the Malaysian economy has gotten better, and the government actually seems to forecast a growth of 5.5% this year, which is really good. However, this type of approach may not sit well with everyone. Food costs and fuel costs are rising, which isn’t exactly ideal in such a situation.
As for the inflation, this may be a bit lower, which is pretty good for a country like Malaysia. The financial markets in the country have been rater resilient in this regard, so the results may end up being quite impressive.
This type of thing reflects the economic growth of the country, but as we said, growth also brings in more challenges. The consumer prices are 3.5% higher when compared to a year ago. The inflation can average up to 3.5% too, so there are quite a lot of challenges to overcome in here.
How will this end up affecting other countries? As you can imagine, there will be some more countries that want to implement this type of policy. But something like this definitely doesn’t end up working for everyone. Yet it can make plenty of sense for some of the neighboring countries. The Philippine central bank is set to raise the interest rates soon, and that’s only one of the many banks which will end up doing the same.
Still, that’s not really a huge issue. There are plenty of benefits to have right now, and the overall benefits can actually be quite amazing in the end. It’s important to study the market a bit more, but for the time being one thing is certain, the key interest rate is higher and it can end up increasing as well!
http://www.straitstimes.com/business/economy/malaysia-raises-key-interest-rate-for-first-time-since-2014
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