The rate of inflation remains under control, says finance minister

by FAYYADH JAAFAR / Pic by MUHD AMIN NAHARUL

THE Minister of Finance Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the country’s inflation rate for the year 2022 remained within the target range set by the central bank.

He added that the inflation rate was forecasted to reach between 2.2% and 3.2%, with the actual rate being 2.5% from January to June.

Tengku Zafrul also said that the current inflation rate was caused by the rising cost of food and fuel. However, he stressed that the government was working to improve the nation’s productivity to make inflation less of a problem for Malaysians.

“As the Malaysian economy faces the Covid-19 crisis, the Overnight Policy Rate (OPR) rate has been lowered from 3% to 1.75% in 2020, which is the lowest level in history,” said Tengku Zafrul.

“Now, our economy is on the road to recovery and we are no longer in a state of crisis.

“Household spending activities, asset purchases and investment activities have also returned to a brisk pace,” he explained in response to the question raised by Senator Aziz Ariffin during the Second Meeting of the Fifth Parliament of the 15th Term.

Tengku Zafrul also said that the growth of the GDP in the first quarter of 2022 (5%) was higher than it was before the pandemic.

However, he pointed out that the rise in the inflation rate was not only caused by the supply side but also showed signs of demand-pull inflation.

“If this is not addressed from the beginning, domestic demand can increase inflationary pressure. Experience around the world has shown that high inflation rates can have a negative impact on the economy and also on people’s living standards,” added Tengku Zafrul.

He explained that every time the situation of inflation became uncontrollable, higher prices could affect the purchasing power of households, especially for low-income groups.

Tengku Zafrul added that the government wanted to emphasise that various assistance programmes were still available for vulnerable groups, including loans from the Bank Negara Malaysia (BNM) fund for small and medium enterprises, targeted loan repayment help from banks and advice from the Credit Counselling and Management Agency as part of their different programmes.

The finance minister also said that the bottom 40% income group (B40) would not be affected much by the gradual increase in the OPR rate.

This is because a third of loans by the B40 group are at fixed rates, most of which are for car purchase loans and personal finance.

“BNM would like to emphasise that any decision to adjust monetary policy in the future will be implemented in a controlled and gradual manner so as not to affect the momentum of Malaysia’s economic recovery,” he concluded.