New Bank Negara Malaysia(BNM) governor Shaik Abdul Rasheed Abdul Ghaffour has brought much needed cheer to individual and business bank borrowers with the announcement of maintaining the overnight policy rate (OPR) at 3% following its two-day Monetary Policy Committee (MPC) meeting that ended today. Malaysia’s road to financial stability and sustainable economic growth relies on prudent management of both fiscal and monetary policy.
Bank Negara has taken the correct monetary policy stance by supporting the government’s efforts to focus on sustainable economic growth amid price stability. Bank Negara is the arbiter of the country’s monetary policy and custodian of our foreign exchange reserves that amounts to USD 113 billion as at 15 June 2023 whilst the Finance Ministry oversees fiscal policy. Policy alignment between an independent BNM and the government is critical to generate public and investor confidence to contain inflation and costs as well as generate sustainable economic growth.
It is reassuring to note that BNM has taken a more accommodative stance in adopting the nearly unanimous consensus of 22 out of 25 economists polled by Reuters of a pause in interest rate hike that is supportive of the economy. Clearly there is no need for any interest rate hike when for the second half of 2023, both headline inflation which moderated to a year low of 2.8% and core inflation to 3.5% in May 2023 are projected to trend lower.