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Lau_utlang
09-07-2008, 11:41 PM
Despite higher Inflation, the Govt is not raising the OPR. Has it abandon the policy of ensuring +ve real Interest rate now? Is it now focus on economic growth at the expense of fighting inflation?

What does this new policy direction mean to us man on the street?

what do you think?

praetor
10-07-2008, 12:01 AM
Ave.

If i am not mistaken, the current saving rates vary from 2.75% to 3.15%. However, our inflation rate is at a hefty 4% at this juncture. If we factor in commodity and food price increase then our monetary devaluation is about 3%.

To put it into perspective, if we are earning 3k a month and we put in 1.5k into our saving accounts, we'd lose approximately 45 ringgit a month with an increase of devaluation per annum.

Does it hurt us a lot? Yes, if you are borrowing money from the bank.

Pax vorbiscum.

chaywh
10-07-2008, 12:06 AM
i agreed w/ praetor.

Lau_utlang
10-07-2008, 08:23 AM
If the Govt is not fighting inflation, that means we have to expect more inflation in the coming months/years. Also savings in the bank will be indirectly taxed due to loss of purchasing power.

Need to think of a better place to store the value of our savings.

Nowiam
10-07-2008, 09:27 AM
If the Govt is not fighting inflation, that means we have to expect more inflation in the coming months/years. Also savings in the bank will be indirectly taxed due to loss of purchasing power.

Need to think of a better place to store the value of our savings.

As the talking heads like to put it - Inflation is 'baked into the system'.

Why? Most people idea of inflation is Increasing Prices. But this is not inflation - this is the visible effect of inflation.

The only way to stop inflation is stop the unreasonable increase in money supply - ie: printing money aka easy credit

Can anyone think which country economy boleh tahan to take this kind of cure at the moment? Can imagine what it means to have no easy credit in our way of life at present?

layman
10-07-2008, 04:58 PM
As the talking heads like to put it - Inflation is 'baked into the system'.

Why? Most people idea of inflation is Increasing Prices. But this is not inflation - this is the visible effect of inflation.

The only way to stop inflation is stop the unreasonable increase in money supply - ie: printing money aka easy credit

Can anyone think which country economy boleh tahan to take this kind of cure at the moment? Can imagine what it means to have no easy credit in our way of life at present?


THe good USA

chaywh
10-07-2008, 05:05 PM
The only way to stop inflation is stop the unreasonable increase in money supply - ie: printing money aka easy credit

There are many ways to control high inflation taxes, and inflation tax cannot be stopped as the gov wanted the public to share the burden, but it can be controlled. What Tun Dr. Mahathir did in 1997 asia financial crisis was one of the ways, others you would need to refer to the package prescribed by IMF.

joker2107
10-07-2008, 06:38 PM
the current situation is what i have been disputing with london uni in the late 80's and early 90s. those text book morons who cannot deviate from the economics bible of keynes insist that interest rates must rise when inflation rises. i insisted on prescribing different remedies depending on the cause of inflation. today's rising prices are supply driven, totally and absolutely beyond the control of the demand side. inflation is biting really hard into essential goods and not goods for which one has an option, whether in brand/supplier or wheter or not to consume. raising interest rates in this envronment is akin to tightening the noose around one who is already suffocated under a ton of oversized pillows. no, i say interest rates should even be reduced and the margin between lending and deposits for financial institutions be narrowed to minimise leakage from the wealth creation carousel. its is worthless to have banks to report billions in gains in their next annual report while half the rest of the economy is out there begging on the streets for their next meal. this is a myopic and very short term benefit and will inevitably topple even the firmest of banks within their next accounting period.

mlkok
10-07-2008, 08:37 PM
Joker, I totally agree with you. The inflation is cost-pushed, not demand-pulled. As it stands, the prices are moving out of affordable range. Increasing the interest rates would only result in lending rates going up, not savings rates. Those servicing ARM loans will have even less disposable cash.
So how does increasing the interest rates help the situation? :confused:

Sato
11-07-2008, 09:43 AM
Despite higher Inflation, the Govt is not raising the OPR. Has it abandon the policy of ensuring +ve real Interest rate now? Is it now focus on economic growth at the expense of fighting inflation?

What does this new policy direction mean to us man on the street?

what do you think?

to me this only mean my bring home income shriken to lowest purchasing power of my life, i have to resort to Foreign Currency Fixed Deposit 9% per annum to counter the inflation, otherwise I won't be able to retire until I m 99 years old. Those with housing loan now will have one hell of a hard time servicing the bank loan interest, all the income almost "eat up" by the increase of cost of almost anything under the sun.

isarahim
11-07-2008, 10:20 AM
i have to resort to Foreign Currency Fixed Deposit 9% per annum to counter the inflation
Make sure it's EURO or STIRLING.

layman
11-07-2008, 10:31 AM
Make sure it's EURO or STIRLING.

the pound is overvalued vs USD
expected to decline to below 1.7(now1.95)

euros still a good bet!!

Lau_utlang
11-07-2008, 10:37 AM
Like the FED, ECB is also printing money though not as much as they are still targeting inflation. Is BNM printing money? Is our M3 growing too fast? Forex FD now gives better protection but carries the exchange rate risk though.

I too am worried I cannot retire as any aging person have to battle medical costs inflation.

ESLord
11-07-2008, 06:10 PM
It just seem RHB had offer a first glimsp of increasing interest rate for savings.
Saw it in the paper last week - 2 years tie-down, incremental from 3.5% per annum on the first 6 months to 4.5% per annum on the final 6 months....
the figure is only approximation- din recall those rates exactly.

The total average increase is only marginal- but do expects other banks to offer more attrative rates as they start to competes.



On different note- those shopping for property loan can consider fix rate loan- one such from AIA where by the whole term of the loan will be subject to a fix rate- independent of BLR. I've got mine 2 years back fixed at 5.99%.
They are currently offering at 5.75% - but the agent claims that it will increase up soon.

It is sort of like gamble- as the initial rate is higher from floating package (BLR minus 1.5% of something like tat). It will does give some peace of mine in case the BLR rise higher.

isarahim
11-07-2008, 08:43 PM
the pound is overvalued vs USD
expected to decline to below 1.7(now1.95)
Actually I think it will appreciate to USD 2.1 or thereabouts.

I don't think any major currency is overvalued against the USD right now.

Though I agree EUR is less risky.

cutebanana
12-07-2008, 11:13 AM
Interest Rate will increase soon. Before budget. Hope that the budget will reduce personal income tax further....

Lau_utlang
12-07-2008, 02:46 PM
Not too sure about Tax reduction. Govt have not money. No prize for guessing where the money went. Windfall tax on IPPs and Plantations are signs of coffer replenishment efforts.

Good if Govt can give +ve real interest rate for savings by increasing interest rate. The man on the street knows the real inflation is higher then the official one dished out from Ivory towers or Putrajaya.

patrick
12-07-2008, 11:00 PM
Ave.

If i am not mistaken, the current saving rates vary from 2.75% to 3.15%. However, our inflation rate is at a hefty 4% at this juncture. ....

Pax vorbiscum.

Isnt 4% a bit conservative??