Malaysian banks raise lending rates

Malaysian banks raise lending rates

KUALA LUMPUR (AFP): Malaysian commercial banks have been steadily raising base lending rates (BLRs) since January, prompted by central Bank Negara's continued tight monetary policy to check inflation, analysts said yesterday.

The average BLR for commercial banks had risen to 7.05 percent at the end of March from 6.8 percent at the beginning of this year.

"I won't be surprised if the BLR goes up to eight percent by the end of this year," said an economist from Rashid Hussain Bhd., the country's leading stockbrokerage.

"We are partially catching up with U.S. interest rates," he added, referring to the string of interest rate increases from the U.S. Federal Reserve last year and early this year.

The latest bank to lift its BLR was top commercial bank Maybank Bhd., which upped its rate by 15 basis points on Tuesday to 6.95 percent from 6.80 percent.

Analysts said the banks had been squeezed by steadily rising domestic interest rates on the local interbank money market.

Bank Negara last month announced it would continue to pursue a stringent monetary policy this year, expressing worries of inflationary pressure from Malaysia's seven years of more than eight percent growth annually.

Unemployment last year declined to 2.9 percent from three percent in 1993 but the central bank said it had managed to keep inflation low at 3.7 percent, just 0.1 percentage point higher than 1993's 3.6 percent.

The three-month fixed deposit rate had also risen to 6.15 percent on average at the end of March from 5.3 percent at the start of the year, analysts said.

The higher rates have also attracted funds away from the stockmarket, which has been depressed since early last year. Analysts said the higher interest rates had contributed to the bearish mood of the bourse, preventing it from making a previously anticipated recovery.

"Ever since interest rates turned in January, people have been attributing it as a factor (for the sluggish bourse)," said an analyst.

The Kuala Lumpur Stock Exchange's barometer composite index closed Tuesday at 964.30 from 971.21 at the end of last year. The index was at its historic high of 1,314.46 on Jan. 5 last year.