English World

Too early to see full effects of US interest rate hike

PETALING JAYA: It’s too early to tell the full effects of the interest rate rise by the US Federal Reserve, said Deputy Finance Minister Datuk Chua Tee Yong.

He said he was confident that Malaysia’s exports would improve as the US economy recovers.

“The latest report by The Dep­artment of Statistics showed that our exports to the US from January to October had increased to RM60.5bil compared to just RM52.7bil in the same period last year,” he said.

Balance of payments had also risen by RM5.5bil in the same period, recording RM14.7bil this year, he said.

On Wednesday, the US Federal Reserve announced that interest rates would go up a quarter of a percentage point, from 0.25% to 0.5%.

The increase was the first time in nearly a decade. In an interview, Chua said that such an increase by the Federal Reserve had removed speculation about the matter and that it was a sign that its economy was on the “right track”.

“It also sends a positive signal to the rest of the world in the form of greater demand from the US economy,” he said, predicting global imports to the US to grow.

As for the effect on the ringgit, Chua warned against using the strength of a currency to measure Malaysia’s economic health.

“The ringgit exchange rate neither reflects the economy accurately nor is it affected solely by one factor only,” he said.

He said the ringgit’s depreciation was partially caused by a “reversal of investment flow” to the US economy after many had predicted its interest rate hike.

Chua also pointed out factors such as a weakening in global commodity prices as well as China’s slowdown in economic growth.

He said various steps were in place to minimise the impact from the exchange rate and other global developments.

“About 97% of government debt was denominated in ringgit and funded mostly from domestic sources, minimising effects from global developments,” he added.

According to him, Malaysia’s RM420.1bil worth of international reserves could sustain the finance of retained imports for 8.6 months as well as 1.1 times the country’s short-term external debt.

“Our trade surplus for the period of January to October 2015 recorded RM76bil, an increase of RM13.4bil compared to the same period in 2014,” Chua added.

– The Star

Komen & Pendapat


!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0],p=/^http:/.test(d.location)?'http':'https';if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src=p+"://platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");