September 30, 2022

Deputy Minister of Finance 1: The gradual increase in the RPO has no significant impact

Deputy Minister of Finance 1: The gradual increase in the RPO has no significant impact

  • Any decision by Bank Negara Malaysia (BNM) to adjust monetary policy in the future would be implemented in a controlled and gradual manner so as not to affect the country’s economic recovery momentum.

KUALA LUMPUR (August 9): The gradual increase in the overnight policy rate (OPR) will not have a significant impact, Deputy Finance Minister 1 Datuk Mohd Shahar Abdullah has said.

Any decision by Bank Negara Malaysia (BNM) to adjust monetary policy in the future would be implemented in a controlled and gradual manner so as not to affect the country’s economic recovery momentum, he said.

Mohd Shahar said that BNM is of the opinion that gradually increasing OPR would not have a significant effect, especially for the B40 group.

“That’s because a third of B40 group loans are fixed rate, most of which are for car purchases and personal financing,” he said during the Q&A. to the Dewan Negara sitting today.

He was responding to a question from Senator Aziz Ariffin on the field study set up by the government on the preparation of the population for the increase in the OPR.

Mohd Shahar said that the BNM, through the monetary policy committee, has decided to gradually adjust the OPR via the increase of 25 basis points (bps) in May 2022 and 25 bps in July 2022 to 2.25% currently.

He said that if the OPR was increased hastily and on a large scale, it could hamper economic growth and affect the well-being of the people, like what happened in the United States, the Philippines and the United States. Turkey, which recorded an inflation rate of 9.1%, 6.1% and 78.6% respectively.

Therefore, he said, the government, through the BNM, wishes to emphasize that various aid programs are still available for vulnerable borrowers.

“This includes facilities under the BNM’s Fund for Small and Medium Enterprises, targeted loan repayment assistance by banks, as well as counseling services under various credit counseling programs and debt management agency.”

Meanwhile, he said the inflation rate in 2022 is expected to register between 2.2% and 3.2% while headline inflation from January to June was 2.5%.

He added that global experience has shown that a high rate of inflation can have a negative impact on the economy and people’s standard of living.

“Rising inflation is not just driven by supply-side pressures, in fact, it has shown signs of demand-driven inflation.

“If this issue is not addressed quickly, domestic demand, if in excess, may add to inflationary pressures,” he said.

Mohd Shahar said that if the inflation situation gets out of control, rising prices of goods will affect the purchasing power of households, especially for the low income group.