Monetary policy remains accommodative of economy — Deputy Governor


Bank Negara Malaysia (BNM) deputy governor Abdul Rasheed Ghaffour (pic credit:

THE Malaysian economy no longer requires the support of monetary policy, according to Bank Negara Malaysia (BNM) deputy governor Abdul Rasheed Ghaffour (picture).

He noted that the gradual hike in the Overnight Policy Rate (OPR) from its historical low of 1.75% to 2% will allow the market to adjust and be viewed as accommodating.

Abdul Rasheed said BNM’s move to raise the OPR last month followed a positive trajectory in the country’s economic growth.

He added that the recovery and strengthening of the economy, among others, could be seen from the rising domestic demand.

Apart from that, he said it was also due to manageable inflation and recovery in the country’s labour market.

“Malaysia’s situation is different from other countries and it is very important to normalise interest rates in an effort to stimulate the economy.

“Therefore, the decision by the Monetary Policy Committee to increase the OPR by 25 basis points (bps) is based on the country’s growth trajectory, which is on a strong track,” he said in a panel session during Maybank’s Invest Asean 2022 conference today.

The conference was also attended by the Finance Ministry’s Deputy Secretary General of Treasury (Policy) Datuk Johan Mahmood Merican and the Institute for Democracy and Economic Affairs director of the economics and business unit Dr Juita Mohamad.

The session was moderated by Maybank Investment Bank Bhd’s chief economist Suhaimi Ilias.

Commenting further, Abdul Rasheed said to further enhance economic growth, there is a strong need for structural reforms, including bringing in high value-added industries and attracting high-value foreign investments.

He added that the interest-rate hike would be done in a planned and gradual manner to foster sustainable economic growth.

“Any increase will take into account the timing and magnitude of the market’s adjustment to the OPR rate hike.

“The market’s adaptation to rate hikes will also depend on the economic growth,” he noted. 

Meanwhile, answering a question on the implementation of the Goods and Services Tax (GST), Johan said as previously informed by the finance minister, no new tax will be introduced as the country’s economic recovery is firmly on track.

He added that the country’s economy was still recovering following the impact of multiple lockdowns and movement restrictions due to the Covid-19 outbreak which began in early 2020.

“For clarity, I want to make sure that I start off by saying no decision has been made on the reintroduction of GST. 

“No new taxes are envisioned until the economic recovery is firmly on track,” he said during the panel session.

That being said, Johan noted that following the Finance Ministry’s mission of consolidating the nation’s fiscal position, the reintroduction of GST is on the cards.

“As you know, we are obviously looking to consolidate our fiscal position. Certainly, GST is something we are currently looking at,” he said.

Meanwhile, during a separate panel session, an analyst projected that the prolonged Russia-Ukraine war will cause disruption to food security in the long run, as sanctions against Russia will have a detrimental impact on global markets. 

Stratfor senior VP for strategic analysis Rodger Baker said it was uncertain whether Europe or the US would immediately change sanctions on Russia once they were in place.

“It is unlikely that these sanctions on Russia will be lifted in the next two, three, four, five years or even more,” he noted.

Baker said the main impact was on global agriculture as it is an important producer and exporter of agricultural produce, while Russia is a major fertiliser exporter.

He also warned about the insufficient fertiliser for crop cultivation, and the reduction of one or two years of crops coming through the Black Sea.

“There will also be a long-term impact on the global liquefied natural gas (LNG) market.

“We may potentially see this finally driving some splits between the pricing in the LNG and oil markets,” he noted.