Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus said this would not be in line with the policy to make only “gradual and methodical” adjustments.
The OPR was last raised in July, by 25 bps, to 2.25%, after its previous adjustment, also by 25 bps, to 2% in May.
Although the OPR has seen an increase of 50 basis points so far, Nor Shamsiah said the momentum for payment of loans has not been affected and that the economy is “absorbing it quite well”.
Nor Shamsiah was speaking after announcing the second quarter (Q2) gross domestic product (GDP) data to the media today.
On the nation’s economic performance, she said GDP growth would be even higher in Q3 than in Q2 based on various factors.
“There is enough tailwind from domestic demand, private consumption, private investment and even public investment,” she said when explaining her brighter outlook for Q3.
Nor Shamsiah said increased domestic demand would offset the moderation in external demand. “All in all, for the whole year, we are sticking with our growth forecast of 5.3% to 6.3% as announced in March 2022,” she said.
On the ringgit, she said it is moving “in line with our trading partners”. She pointed out that if the ringgit strengthened against the currencies of Malaysia’s trade partners, it would affect the country’s competitiveness.
“At least against our trading partners, we are stable,” she pointed out.
Nor Shamsiah said Malaysia should move away from its “fixation” on bilateral exchange rate and start looking at it “from another perspective”.
“One way to look at it is from a nominal effective exchange rate (NEER),” she said.
On the proposal to replace the blanket subsidy regime with one of targeted subsidy, she said the best time to implement the change is when the country is not faced with high inflationary pressures.
“The targeted subsidy rationalisation must account for two things: the current inflation environment and the fact that it must be done in a ‘paced’ manner,” she said.
The objective, she pointed out, is to achieve sustainable and inclusive growth.
She noted that there still are segments of households and businesses that have yet to return to pre-pandemic levels, so assistance has to be given to these vulnerable groups.
“This can only be done if we move from a blanket subsidy, which is costing the government a lot of money, to a more targeted regime,” she added.
Nor Shamsiah added that when the country moves to an environment of targeted subsidy it will cause inflation to rise but because of the savings garnered from the move to protect the vulnerable groups, the impact on the economy can be managed.
With regards to the recent iPay88 breach, she said the authorities have been in communication with the payment service provider and more importantly, to make sure that the banks affected have taken precautionary measures to safeguard the data of consumers.
She said BNM was only made aware of the breach at the end of July given that it does not, technically, have supervisory authority over the payment system.
She also stated that there is no evidence to suggest that there are any vulnerabilities in the banking system.