Friday, June 3, 2016

Ramadhan Ruminations

Throwing this out there because this is a narrative that really ought to change:

In the runup to BNM’s latest MPC, there was a lot of market speculation that BNM should cut the OPR, because the numbers appear to justify it (lower credit growth, poor business and consumer sentiment, slowing GDP growth etc). In fact, even as the MPC stayed on hold, there continues to be opinions out there that a rate cut is and should be in the offing, with some thinking that the weakness in the MYR vis-a-vis the USD is what’s holding the central bank back from easing monetary policy.

Under different circumstances, I’d fully agree that monetary policy should be loosened. But I think in the present case, the narrative should be turned on its head, as I think the causality runs the other way.