COMMENT | Bank Negara clears the air on OPR hike

COMMENT | Effective monetary policy is not just about raising or lowering interest rates by the right amount at the right time. It is much more about effective communication of the reasons why interest rates are changing. Credible, accountable and transparent policy announcements help people to feel confident that the changes in policy are properly justified.

Yesterday, Bank Negara Malaysia (BNM) provided a very clear explanation of its decision to raise the Overnight Policy Rate (OPR) by 0.25 percent for the second time in two months.

In the spirit of greater transparency, the publication of the Monetary Policy Statement was followed by an open and detailed briefing for economists and analysts which cleared the air on many issues that have been of concern.

First, we learned that BNM is more confident about the recovery in Malaysia based on indicators such as employment, wages and opening up of key sectors, including tourism.