KUALA LUMPUR, Nov 21 — Malaysian borrowers will likely be affected if the US Federal Reserve increases its interest rates next year, the Malaysian Institute of Economic Research (MIER) said today.

Its executive director Professor Emeritus Zakariah Abdul Rashid said the US Federal Reserve’s decision, along with those of other developed nations, might force Bank Negara Malaysia (BNM) to increase its overnight policy rate (OPR) next year too.

"If they increase the rate, most likely Bank Negara will have to adjust their rates,” he told reporters after his presentation at the National Economic Outlook 2018-2019 Conference, pointing out the dilemma facing Malaysia’s central bank.

Zakariah said the central bank needs to weigh the impact on consumers here.

"If you make the cost of borrowing more expensive, you will put more burden on household debts because household borrowing becomes more expensive.

"If BNM decides to go against US Fed’s decision on normalisation and maintain the current interest rate, Malaysia will see a spike in capital outflow but if it follows the US trend and increases the rates, the public might suffer,” he added.

But Zakariah also said that current data do not indicate that BNM will increase its OPR.

He said inflation is still under control and the ringgit is strengthening against the greenback.

‘It all depends on indicators that may come next year, in the first quarter. [Right now] we don’t know,” he added.