Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus has reassured the public that BNM will not likely increase the overnight policy rate (OPR) drastically by year-end.

Tan Sri Nor Shamsiah explained that the central bank will not take an aggressive approach in normalising its monetary policy to the pre-pandemic level as this will risk disrupting the country’s economic growth. To note, Malaysia’s OPR prior to the onset of Covid-19 was recorded at 3% – 75 basis points (bps) higher than the current OPR of 2.25%.

“We [BNM] have said that any adjustment and recalibration to monetary policy will be done in a gradual and measured manner. So changing [the] OPR by 75bps this year will not be in line with that,” stressed the governor. 

Additionally, Tan Sri Nor Shamsiah reiterated that the central bank’s decision to raise the OPR twice thus far in 2022 was spurred on by the fact that Malaysia is clearly no longer in crisis anymore. “This view remains unchanged as the economy continues on its recovery path with a growth of 6.9% in the first half of this year,” she added, referring to the OPR hikes in May (25bps) and July 2022 (25bps). 

“As such, the recent OPR adjustments would also pre-emptively manage the risk of excessive demand on price pressures. This is important because whenever the inflationary pressures are excessive, it is damaging to the economy and causes even deeper hardships for the rakyat compared to a gradual increase in policy rates,” the governor further said. 

Tan Sri Nor Shamsiah also stated that the OPR adjustments made were necessary to avoid the need for stronger measures in the future, such as faster and steeper OPR hikes. 

“We obviously do not want to be in such a position. We [BNM] will continue to conduct monetary policy in order to achieve our goal of price stability and sustainable economic growth over a longer term,” she elaborated, adding that the central bank will also continue to assess evolving conditions and their impacts on the country’s inflation and growth. 

Several local investment banks as well as financial and research institutions have commented that Malaysia’s OPR will likely settle between 2.50% to 2.75% by the end of this year. 

(Sources: New Straits Times, The Malaysian Reserve) 

• TAGS:
• Bank Negara Malaysia
• BNM
• OPR
• Overnight Policy Rate
• Tan Sri Nor Shamsiah Mohd Yunus