Congratulations to Abdul Rasheed Ghaffour on officially assuming his duties as the new Governor of Bank Negara Malaysia(BNM) effective today. Abdul Rasheed takes charge of an important financial institution that serves as the arbiter of the country’s monetary policy and guardian of our foreign exchange reserves that amounts to USD 113 billion as at 15 June 2023.
Abdul Rasheed takes over at a critical time when the value of the ringgit is under pressure having depreciated to RM4.68 to the US dollar under the unity government. Even though this is still higher than the lowest level under the PN government last year, when the ringgit fell to a record low of RM4.75 to the US dollar, the weak ringgit has given rise to serious concerns of escalating costs of imports to individuals and businesses.
To fulfil its mandate to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy, there is a need for policy alignment between BNM and the Finance Ministry led by Prime Minister Anwar Ibrahim. Only then can Malaysia sustain economic growth without exciting inflationary pressures in a global environment of weak global economic growth and stubborn inflationary expectations.
Interest rate policy normalisation should not be implemented prematurely, when inflation is already declining, until robust economic growth is assured. There will be heightened interest in the coming Monetary Policy Committee meeting on 6 July, the first one chaired by Rasheed, on whether to continue or pause hikes in the Overnight Policy Rate(OPR). Borrowers enduring higher interest costs and concerned about sustained economic growth are hoping that BNM will provide some relief by pausing OPR hikes when the inflation rate moderated to 2.8% in May from 3.3% in April 2023.