KUALA LUMPUR May 12 – Action taken by the Monetary Policy Committee (MPC), Bank Negara Malaysia (BNM) to increase the overnight policy rate (OPR) by 25 basis points (bps) to 2% shows that the central bank has taken pre-emptive measures to curb inflationary trend.
Juwai IQI Chief Economist, Shan Saeed said BNM has raised 25bps in the discount rate to send signal to the market that inflationary pressure can be contained with the central bank got lots of room to manoeuvre in the monetary landscape.
“BNM has got two monetary tools to curb inflation that is by raising discount rate and the appreciation of the ringgit.
“Out of the two, discount rate looks more pragmatic and in line with market expectation. At the moment, the inflation numbers are showing its head but still under 2.8% at the present level, he told DagangNews.com here today.
Shan was responding to the move on Wednesday by BNM to raise 25bps to 2 percent from a record low of 1.75% as global inflationary pressures have increased sharply.
Such measure was also taken after taking into account following the reopening of global economy and improvement in labour markets continue to support the recovery of economic activity from the impact of COVID-19 driven movement restrictions.
BNM said the ceiling and floor rates of the OPR's corridor are correspondingly increased to 2.25% and 1.75% respectively.
With rise in discount rate, Shan said the cost of consumer debt goes up and debt servicing level for corporates rises as well.
“Consumers have to pay more on their debt obligation whether its credit card or car loan or mortgages or personal loans,” he said.
According to Shan, BNM has made a tactical move after the US Federal Reserve (FED) raising rates last week.
He said BNM’s move is a smart call to maintain price stability for the year and bolster economic growth outlook.
“We at IQI Global expect GDP to meander around 4 to 5% in 2022 with RM maintaining structural stability in the system,” he added.
He said BNM has played a crucial role to maintain the country’s economic momentum, including curbing inflation despite the current global economic uncertainties. – DagangNews.Com
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