PETALING JAYA: The Monetary Policy Committee (MPC) of Bank Negara has increased the overnight policy rate (OPR) by 25 basis points to 2.25% amid positive growth prospects for the local economy.
“For the Malaysian economy, economic activity continued to strengthen in recent months.
“Exports and retail spending indicators affirm the positive growth momentum, supported by the transition to endemicity, “ the central bank said in a statement yesterday.
The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.5% and 2%, respectively.
The OPR, which is a benchmark rate that allows banks to determine their lending and deposit rates, had been reduced by a cumulative 125 basis points during the course of the Covid-19 pandemic, bringing it to a historic low of 1.75%.
Yesterday’s increase was a second consecutive one after a 25-basis-point hike in May, which was also the first time the OPR was raised since the onset of the pandemic.
OCBC Bank economist Wellian Wiranto said the fact that the central bank had not gone more “ballistic” with a 50-basis-point hike yesterday speaks of a “heavy preference for a gingerly approach in tightening.”
“That is a prudent thing, given how global recession fears are on the rise,” he said.
Going forward, he said he expects at least one more 25-basis-point hike this year that will be seen as a further normalisation of policy rate rather than outright tightening.
“It might then pause in the last meeting of the year in November to assess the balance between inflation and recession risks before undertaking any action thereafter,“ he added.
In its statement, the central bank said the extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and the continued spare capacity in the economy.
“The inflation outlook continues to be subject to global commodity price developments, arising mainly from the ongoing military conflict in Ukraine and prolonged supply- related disruptions, as well as domestic policy measures,“ it said.
Year-to-date, headline inflation averaged 2.4%.
.In its statement, the central bank said the extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and the continued spare capacity in the economy.
“While it is projected to remain within the 2.2%-3.2% forecast range for the year, headline inflation may be higher in some months due mainly to the base effect from electricity prices.
“Underlying inflation, as measured by core inflation, is expected to average between 2% and 3% in 2022, as demand continues to improve amid the high-cost environment,” it said.
Bank Negara said that in recent months, the unemployment rate had declined further, with higher labour participation and improving income prospects.
“Looking ahead, while external demand is expected to moderate, weighed by headwinds to global growth, economic growth will be supported by firm domestic demand.
“Additionally, the reopening of international borders since April 1 would facilitate the recovery in tourism-related sectors.”
Nevertheless, the central bank warned of downside risks to growth that continue to stem from a weaker-than-expected global expansion, further escalation of geopolitical conflicts and worsening supply chain disruptions.
“Even as it continues to project a strengthening economic recovery, things are likely to turn less rosy from here,” OCBC’s Wiranto said.
Bank Negara said that at the current OPR level, the stance of monetary policy remained accommodative and supportive of economic growth.
“The MPC will continue to assess evolving conditions and their implications on the overall outlook to domestic inflation and growth.
Rakuten Trade head of equity sales Vincent Lau told StarBiz yesterday’s hike was a reflection of confidence in the continued growth of the Malaysia economy.
“Any adjustments to the monetary policy settings, going forward, would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability.”
Meanwhile, Rakuten Trade head of equity sales Vincent Lau told StarBiz yesterday’s hike was a reflection of confidence in the continued growth of the Malaysian economy.
“With the increase in our benchmark rate, this may also stem the outflow of foreign money, which will technically see higher returns alongside the higher rate,” he said.
That said, the stock market fell over 20 points at the close yesterday after the hike was announced.
“It was probably a knee-jerk reaction as the hike had more or less been priced in already,” Lau said.
Bursa Malaysia’s fall was also in line with most regional markets as the fear of a global recession continued to rear its ugly head.
Nevertheless, at the close of the market yesterday, lenders like Malayan Banking Bhd and CIMB Group Holdings Bhdfinished higher as investors bought the stocks, banking on a higher OPR that could likely boost the lenders’ earnings.
The US looks at reducing China tariffs amid soaring inflation in the country
US and China Discuss Trump-Era Tariffs Biden May Ease
Yang Jiechi (center), a member of the Political Bureau of the Communist Party of China Central Committee and director of the Office of the
Central Leading Group for Foreign Affairs, criticizes human rights issues in the US at the opening session of US-China talks in Anchorage, Alaska on March 18, 2021. Photo: AFP
The US is seeking help from China to ease its economic pressure, hinting that it may ease tariffs on Chinese goods and engage in dialogue with senior Chinese officials more often. However, analysts said Beijing will approach Washington's overtures with caution, as it is still trying to use the tariffs as bargaining chips rather than sincerely correcting its mistakes that have harmed both sides.
Chinese Vice Premier Liu He, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee and chief of the Chinese side of the China-US comprehensive economic dialogue, held a conversation via video link with US Secretary of Treasury Janet Yellen at the latter's request on Tuesday morning, according to the Xinhua News Agency.
As agreed by China and the US, Chinese State Councilor and Foreign Minister Wang Yi will meet with US Secretary of State Antony Blinken during the meeting of G20 foreign ministers, Chinese Foreign Ministry announced on Tuesday. In June, the defense chiefs of both sides met in Singapore on the sidelines of the Shangri-La Dialogue, and Yang Jiechi, member of the Political Bureau of the CPC Central Committee and director of the Office of the Central Commission for Foreign Affairs, met with US National Security Advisor Jake Sullivan in Luxembourg.
Such frequent communications between senior officials of the two sides show that China and the US are making efforts to manage the differences and competition to prevent escalation caused by miscalculations, while at the same time, the US is trying to seek China's help to ease the serious inflation the US is being confronted with, analysts said.
Chinese analysts said on Tuesday that although its economy is in disarray, the US is still being provocative in geopolitical issues to contain China. This means the US should not expect China to provide significant support for it to solve its domestic problems. The US tariffs have turned out to have a limited impact on the Chinese economy, and these are just part of the mistakes that the US must correct to bring bilateral ties back on track.
Heavy pressure
During the Liu-Yellen conversation on Tuesday, the two sides had a pragmatic and candid exchange of views on such topics as the macroeconomic situation and the stability of global industrial and supply chains. Their exchanges were constructive, the Xinhua reported on Tuesday.
The two sides agreed that as the world economy is facing severe challenges, it is of great significance to strengthen macro-policy communication and coordination between China and the US. Jointly maintaining the stability of global industrial and supply chains is in the interests of both countries and the whole world. The Chinese side expressed its concern about issues including the lifting of additional tariffs on China and sanctions by the US side, and fair treatment of Chinese enterprises, the Xinhua reported.
Lü Xiang, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Tuesday that the US has been forced to engage with China because of its dreadful domestic economic situation.
"Joe Biden now is having a big headache as his approval rating is even lower than his predecessor Donald Trump at the same stage of presidency, which is a great humiliation. The pressure to win the midterms is heavy and serious, so he must find solutions to at least make some changes," Lü said.
Biden's approval rating was 39 percent as of June 30, according to an analysis by poll tracker FiveThirtyEight, while 56.2 percent of Americans disapproved of the way the president is handling his job, according to the Newsweek.
Trump's approval rating on July 1, 2018 was 41.8 percent, while 52.3 percent of Americans disapproved of him, figures from FiveThirtyEight show.
In 2018, Republicans suffered a major defeat in the midterm elections and lost 40 seats in the House of Representatives, handing control to the Democrats and allowing Nancy Pelosi to return as speaker.
Experts said the main factor that could influence the midterms later this year is the economy, so if the Biden administration cannot deliver some positive changes to ease inflation and gas prices and stop the economic decline, the Democrats are likely to repeat the failure of the Republicans in 2018.
Far from easing tension
According to Bloomberg on Tuesday, Biden may announce as soon as this week a rollback of some US tariffs on Chinese consumer goods - as well as a new probe into industrial subsidies that could lead to more duties in strategic areas like technology.
Although decreasing tariffs on Chinese goods has become an option for the US to solve some of its economic problems, it is still not clear what measures the US government will take next, experts said.
According to one estimate by the New York Federal Reserve, US tariffs imposed on Chinese goods through the middle of 2019 cost the American household an average of $831 per year.
"Decreasing tariffs on Chinese goods is a way to decrease inflation without the danger of hurting economic growth, but the US is not sure about the extent to which the tariff cuts would be effective in controlling price hikes. Therefore, the US government is still worrying about gains and losses and can't make up its mind," Gao Lingyun, a trade specialist with the Chinese Academy of Social Sciences in Beijing, told the Global Times on Tuesday.
Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Tuesday that "under the US' general strategy of containing China's rise, which is unlikely to change in the short term, the US might adjust some of the punitive tariffs on Chinese consumer goods, but at the same time intensify pressure on China, such as increasing sanctions on Chinese tech firms."
Lü said that judging from the US' failed COVID-19 pandemic response, Afghanistan withdrawal, inflation and the Ukraine crisis, we found "the US system of command is problematic, and the coordination between White House staff and cabinet officials is desperately wanting. Therefore, in the future, we have to be prepared for many uncertainties and even some overnight contingencies." He added that it is caused by the problematic decision-making system of the US side.
What should China do?
Gao said that China should insist on an reciprocal tariff policy with the US, meaning cutting the same amount of tariffs on US goods if the US reduces tariffs on Chinese products. China should also insist that tariff reductions should bring benefits to both countries, he said.
Bai noted that China should stick to its dual circulation policy, especially focusing on internal circulation so external policies would not affect China's economy to a great extent.
Chen Jia, a research fellow at the International Monetary Institute of the Renmin University of China, said that market data show that the US economy is deeply bogged down in stagflation, while recessionary risks are increasing, which means the US is still far from reaching a turning point to stop its economic situation from worsening.
On the other hand, the US is not making even small concessions in global strategies, rather it is showing an inclination to toughen the strategic encirclement of China, such as the recent Partnership for Global Infrastructure to target the China-proposed Belt and Road Initiative.
"If the US is willing to seize the opportunity to restart China-US high-level communication on the basis of economic cooperation, and move to repair the damage it has caused in the past, China would of course welcome and support those moves. But if the US continues to treat its global partners arrogantly, then it won't get any help from developing countries including China," Chen told the Global Times.
The US should abide by the provisions of the Three Joint Communiqués, stop hollowing out the one-China principle, stop
supporting “Taiwan independence” forces, and take concrete actions to safeguard the political foundation of China-US relations, Zhao Lijian,
spokesperson of the ...
US’ so-called rule-based order means international gangsterism
The United States’ so-called rule-based order is gangsterism while its sanctions on other countries are illegal, a renowned Canadian lawyer has said a recent interview. Christopher Black, a veteran Canadian lawyer who has been involved in a number of high-profile cases, including defending former Yugoslav President Slobodan Milosevic, strongly condemned actions from the U.S. and the U.S.-led North Atlantic Treaty Organization (NATO), which have repeatedly accused other countries of destroying postwar international orders, portraying themselves defenders of international order. The lawyer believes that U.S. sanctions on other countries are illegal and are a ploy to defend its economic wars against other countries.
China's challenge to the rules-based order
Top priority: The moral principle that we all should live peacefully on one planet should over-ride sovereign nations fighting over power and ego from turf to space, when humanity could be burned by climate warming or nuclear war. — AFP
EVERYDAY, we are told we must defend the rules-based order. But whose order? What rules? Why should we defend an order if we did not have a say in shaping?
All this is in the realm of politics and geo-politics. The biggest thinker who shaped the current neoliberal order was Austrian philosopher Friedrich Hayek (1899-1992), whose ideas of classical liberalism of freedom, democracy and self-order of markets dominated global relations.
Neoliberalism was put into practice in the 1980s, when US President Ronald Reagan and British Prime Minister Margaret Thatcher pushed through the free market philosophy that swept away Keynesian state intervention of the 1950-1970s.
The deeper thinker on the whole question of constitutional law, politics and international order was German jurist Carl Schmitt (1888-1985), whose influence on conservative political circles in almost all the Big Powers has been growing.
I only became aware of Schmitt’s work when Noema magazine wrote an editorial on Schmitt’s Nomos of the Earth (1950).
Schmitt is controversial, because he essentially wrote the legal basis for Nazism in the 1920s, which accounts for his ostracisation (in today’s language “cancelled”) from academic circles for decades.
Main priority: A demonstration calling on the German government not to intervene in the ongoing conflict in the Ukraine, in Berlin. The moral principle that we all should live peacefully on one planet should over-ride sovereign nations fighting over power and ego from turf to space, when humanity could be burned by climate warming or nuclear war. — AFP
Schmitt was a brutally realist thinker who explored the legal foundations of European political theory. Schmitt argues that no order can function without a sovereign authority. A state is legally constituted when the politics distinguishes between friend and enemy and when the citizens are willing to fight and die for its identity. The state alone is given the power of violence (and enforcement) by the citizens to enforce the law.
Schmitt is considered an authoritarian supporter, because he saw sovereign power resting ultimately in the Executive (rather than the Legislature or Judiciary) because the sovereign (i.e. the President) decides on the exceptional situation, where he/she must suspend the law because of war or assume emergency powers in order to restore order.
Decisions by the Executive are either bound by law or bounded by his or her moral bearings.
The world is today watching on TV whether former President Trump is morally culpable for causing the Jan 6, 2021 riots, or legally culpable.
The Ukraine war is being supported by the North Atlantic Treaty Organisation or Nato on a matter of moral principle for a non-member, but if the war escalates to nuclear global destruction that kills all, how do we trade off the individual rights with the collective right of everyone else to survive?
Schmitt dissected the European constitutional laws and international order, dividing them into three phases: pre-1500, 1648 to 1919 (World War I) and thereafter.
Before the discovery of America, European powers fought each other under a religious cloak, since the Pope decided on disputes of rights on moral grounds.
Indeed, it was the Papal Bulls of 1455 and 1493 that authorised the Portuguese and Spaniards to conquer all lands and seize and enslave Saracens and non-Christians in the Americas, Africa and Asia.The religious rationales comprised the Domination Code whereby Christians can rule over non-Christians and possess their property, as well as the Discovery Code, whereby land owned by non-believers are treated as terra nullius (empty land), meaning non-Christian indigenous peoples do not have rights.
But when the Dutch and English started fighting with the Portuguese and Spaniards over overseas territories, what was the legal justification?
Dutch jurist Grotius (1583-1645) provided the secular rationalisation that discovery alone is not enough, but since there was freedom in the seas, occupation by a sovereign state confirms rights seized through war.Schmitt argued that Jus Publicum Europaeum (European Public Law) emerged after the 1648 Treaty of Westphalia to allow sovereign countries to have the right to go to war based on their own judgement of justice and necessity without interference in each other’s domestic affairs.
This changed after the end of the First World War, when the 1919 Treaty of Versailles treated the losing side as criminals, with their rights cancelled or confiscated.
While the Europeans were busily fighting each other, the United States rose in global power and imposed its 1823 Monroe Doctrine that asserted that it has its own sphere of influence, with the right to intervene in Central and South American states.That sphere of influence would spatially cover cultural, economic, military, political and today technology exclusivity beyond legal sovereign borders.
Schmitt was prescient in seeing that where war is fought on the basis of “good versus evil”, in which all rights of the other side are “cancelled” (like the foreign exchange assets of Afghanistan and Russia are frozen or seized), the situation may be an unstable equilibrium.
The unstable European security architecture was settled decisively by the United States in two World Wars because of her overwhelming military, economic and industrial power.
But in today’s multipolar situation, who decides on the rules of the international order? If both sides accuse the other side as evil and illegitimate, who decides other than the use of arms?
To cut a complex story short, the Nato military alliance, comprising nearly one billion people and 47.3% of the world’s gross domestic product or GDP (2020) assumes its status quo role as the final arbiter of the “rules-based order”.
The problem is that BRICS countries (Brazil, Russia, India, China and South Africa), plus Indonesia have 3.5 billion population with one quarter of world GDP in market terms (25.6%).
However, on GDP PPP terms, they are near parity with Nato and therefore may have their own views on the international order. What if the larger non-Western countries want their own version of the Monroe Doctrine?
The moral principle that we all should live peacefully on one planet should over-ride sovereign nations fighting over power and ego from turf to space, when humanity could be burned by climate warming or nuclear war.
For Nomos (or order) of the Planet, rather than the Earth, we should all rationally cooperate. If we truly believe in democracy, can the eight billion people in the world vote on the rules-based order, or do we still leave it to G-7?
No order is stable without true legitimacy on democratic principles. How to achieve that order remains a truly open question.
Andrew Sheng writes on global issues from an Asian perspective. The views expressed here are the writer’s own.
and CIMB Group Holdings Bhd
