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PUTRAJAYA – The overnight policy rate (OPR) can remain at 2.75% if the country’s inflation rate continues to subside in the coming months, said Economy Minister Rafizi Ramli.
He said food prices are the largest domestic contributor to inflation.
“If the inflation rate continues to ease in January and February with the OPR at 2.75%, it would indicate that the OPR can be maintained at 2.75%,” he told a press conference today in a briefing on the function of OPR hikes to curb rising inflation here today.
Last Friday, the Statistics Department announced that the inflation rate eased to 3.8% in December 2022 from 4% in November 2022.
Rafizi said that in theory, Bank Negara Malaysia (BNM) would use monetary policy via the OPR to curb rising inflationary pressure in the local market.
“When inflation rises at a faster pace, then you would want to limit demand and the way to do it is to increase OPR.
“We can still taper down inflation while maintaining the OPR. If we become more price aware, we can hopefully maintain the kind of OPR that the public wants,” he said.
He said the country’s inflation rate appears to be easing, which is a good sign in the effort to control inflation and bring it back to the normal level of around 2%.
Rafizi said that last year, inflation peaked in August and September at 4.7% and 4.5% respectively.
“The graph is seen to be going down and that is a good sign. We hope that it will gradually return to a more normal level of inflation, which is the previous level of about 2%,” he added.
On January 19, the BNM Monetary Policy Committee decided to maintain the OPR at 2.75% after four consecutive increases.
The four consecutive rate hikes of 25 basis points each in May, July, September, and November last year brought the OPR to 2.75% from a historic low of 1.75%. – Bernama, January 25, 2023
