Thursday, February 5, 2009

Expect interest rates to be cut further

Asian central banks, including Malaysia’s, are expected to further cut interest rates this year, as the region’s export-reliant economies struggle to cope with falling demand from recession-hit US and Europe, analysts say.

“Aggressive rate cutting is expected to stay in 2009 for several Asia-Pacific countries excluding Japan, in order to cushion the impact of a global economic slump,’’ Inter-Pacific Research said in its latest report.

Asian central banks embarked on hefty interest rate cuts in the second half of 2008 when the global economic crisis widened.

Bank Negara slashed its key lending rate by 75 basis points to 2.5% on Jan 21. This was on top on a 25-basis-point cut on Nov 24.

Lower interest rates will not only spur domestic lending, but will also weaken the local currency against the US dollar.

A weak currency is positive for exporters, as this will make their products more competitive overseas.

The ringgit hovered at about 3.61 against the US dollar yesterday.

It had fallen about 10% against the greenback over the past six months.

My comment on this issue? I do not know when the interest will be cut and I also cannot predict when is the best time to invest into properties or stock market. However, given that I'm in Penang as well as working here, I know there are many outstation people working here coupled with the economy crisis that hit so many factories here, the best I would suggest is to adopt the 'wait and see" policy, try to secure our current job and have some saving as backup. It's always good to have backup right? ;)

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