BNM governor Nor Shamsiah Mohd Yunus singled out rising costs, the Russia-Ukraine military conflict and China’s strict containment measures against Covid-19 as the challenges that could scuttle economic recovery.
She said Malaysia continues to benefit from strong demand for its exports, especially electrical and electronic goods as well as commodity-based products.
“We are seeing increasing strength in domestic demand. Domestic spending, particularly consumer expenditure on retail sales as well as debit card transactions and consumer goods imports have exceeded pre-pandemic levels,” she said in her keynote speech at the 12th International Conference on Financial Crime and Terrorism Financing 2022 (IFCTF 2022) here today.
Shamsiah said 26,000 new jobs were created in the first three months of this year, similar to the pre-pandemic level.
This shows the country’s economy has benefited from the strengthening job market, she said.
“Simultaneously, job vacancies and wages are also rising, which would further reinforce the recovery in domestic demand going forward,” she added.
On rising prices, Shamsiah emphasised that the current situation is a global phenomenon and Malaysia is feeling the indirect effect of high global commodity prices as they are the key driver in the rise in producer input costs.
She said while headline inflation is projected to remain low and stable and within the 2.2% to 3.2% range, core inflation has risen to an average of 2.2% in the first six months of the year from only 0.7% in 2021.
The governor reiterated that as the economy was on a firmer growth trajectory and no longer in a state of crisis, the central bank judged that it was the right time to begin withdrawing the excess support by revising the overnight policy rate from its historic low of 1.7%.
“What is important is to act pre-emptively. We will be in a position to undertake the adjustment to the monetary policy setting in Malaysia gradually and this is also to restore and support sustainable growth over the medium and long term,” she said, adding that the timing, pace and extent of interest rate increases will be guided by assessments.