Interest rate cut could cause ringgit to depreciate further, says Dr Wee

PETALING JAYA: Bank Negara’s decision to lower interest rates could cause the ringgit to depreciate further and the Government should closely monitor the local currency, says MCA president Datuk Seri Dr Wee Ka Siong.

He said the reduction of Overnight Policy Rate (OPR) to 3.00% on Tuesday (May 7) has reduced the gap between Malaysia and United States interest rates, which were between 2.25% and 2.5%, after the US repeatedly raised its rates last year.

“Therefore, more foreign funds may decide to sell Malaysian bonds and withdraw money from Malaysia to invest in the United States or other countries,” he said in a Facebook post Tuesday (May 7).

If this happens, Dr Wee said the ringgit could fall further against the US dollar - especially if the United States increases its interest rates this year.

“I hope the Government will monitor and control the ringgit so that the depreciation since GE14 will not deteriorate further,” he said.

The Ayer Hitam MP also said that the decision to reduce the interest rate showed that the economy has become sluggish.

“Although such a move can help the economy, it also puts pressure on the ringgit,” he noted.

Earlier on Tuesday (May 7), the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the OPR to 3% at its meeting.
This was the first time since July 2016.