Hiking OPR gradually won't cause significant impact - Shahar

Gradual increase in the overnight policy rate (OPR) will not cause a significant impact, said Deputy Finance Minister 1 Mohd Shahar Abdullah.

Any decision made by Bank Negara Malaysia (BNM) to adjust the monetary policy in the future would be implemented in a controlled and gradual manner to ensure it would not affect the country’s economic recovery momentum, he added.

Shahar also said the measure would not affect the B40 group significantly.

“This is because one-third of loans by the B40 group are at fixed rate, most of which are for buying cars and personal financing,” he said during the question-and-answer session at the Dewan Negara sitting today.

He was replying to a question from Senator Aziz Ariffin on the field study conducted by the government on the people’s preparedness when OPR is increased.

Shahar said BNM, through the Monetary Policy Committee, decided to adjust the OPR gradually via the increase of 25 basis points (bps) in May 2022 and 25 bps in July 2022 to 2.25 percent currently.

He said if the OPR is increased hastily and at a higher quantum, it could hinder economic growth and affect the well-being of the people such as what happened in the US, the Philippines and Turkiye, which recorded inflation rates of 9.1 percent, 6.1 percent and 78.6 percent, respectively.

Hence, he said the government is providing various aid for vulnerable borrowers.

“This includes facilities under BNM’s Fund for Small and Medium Enterprises, targeted loan repayment assistance by banks, as well as advisory services under various Credit Counselling and Debt Management Agency programmes,” Shahar said.

Meanwhile, he said the inflation rate for this year is expected to hover between 2.2 percent and 3.2 percent while headline inflation from January to June was at 2.5 percent.

He added that worldwide data has shown that a high inflation rate could affect the economy and people’s lifestyles.

“The rise in inflation is not only driven by supply-side pressures. In fact, it has shown indications of demand-pull inflation.

“If it is not addressed early, excess domestic demand can also add to the inflationary pressures,” he said.

Shahar said if the situation becomes uncontrollable, the higher prices of goods would affect households’ purchasing power particularly of the low-income group.

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