Inflation, OPR, BLR, Currency & You

Inflation, OPR, BLR, Currency. These words seems to be hitting the financial news headlines lately. Besides inflation, what the other terms has to do with you?

Staying in city is not easy, the cost of financing a property is always double the ones in smaller towns. The cost of financing is directly affected by BLR(Based Lending Rates). So, if you are staying in the city and planning to purchase a property, inflation and BLR will be one of the major concerns for you.

Inflation creeps into our daily life, causing us to spent more for less goods. This is what we can feel directly when inflation hits us. How about our savings, trust funds and stocks? Our liquid assets will be less valuable. Imagine your FD rates is 3 % while the inflation rate is 7 %. Whatever you have today is worth lesser tomorrow.

One of the ways to fight inflation is to increase the OPR (Overnight Policy Rates or Interbank Lending Rates). Increasing OPR will slow down inflation as business activity will slow down due to tightening of banking facilities. Besides that, the OPR might be higher than inflation rate as a result, giving positive return rate for your liquid assets.

Bank Negara has recently decided not to raise the OPR. Therefore, BLR will not be raised as well. Most of the property owners hence felt relief about the decision. The stock market has also return to bullish state as cost of borrowing for business remains stable following this announcement. However, the retaining of rates might also signify that our economy is lethargic. We cannot to afford a setback in economy growth now by raising the rates. On the negative side, inflation might also be spiraling up in months to come as a result of the decision.

Now that Bank Negara maintained the OPR rates, we are also facing yet another crisis, the currency crisis. If you check on the BNM FOREX rates, you will notice that MYR has been depreciating since the announcement of Bank Negara on 25th July.

Currency devaluation is a scary phenomena. Imagine your hard-earned money accumulated since the past 10 years is depreciating by 5-10 % every year. Your EPF money will be eaten up by inflation and currency devaluation. We are experiencing the toughest time ever, in wealth management and economy management.

It's far too complicated to analyse the best solution to manage our current economy. It's a tough decision to make in deciding whether to raise the rates in order to maintain our economy's health. I have been admiring Zeti for her calmness and intelligence for a long time. I hope she had made a wise decision this time.