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BUSINESS

OPR hike aims to ensure sustainable growth - SME Bank

17/05/2022 07:22 PM

KUALA LUMPUR, May 17 (Bernama) -- Bank Negara Malaysia’s (BNM) move to raise the Overnight Policy Rate (OPR) to 2.0 per cent aims to ensure that the monetary policy remains accommodative to support sustainable economic growth while enabling the economy to withstand external shocks, said SME Bank.

In a statement, group chief executive officer Dr Aria Putera Ismail said as the domestic economy is growing on a firmer footing, the group expects that the degree of monetary accommodation would be reduced in a measured and gradual manner, especially in an environment of price stability.

Meanwhile, the banking group’s chief risk officer Mohammad Azam Ahmad said through the government’s various efforts to revive the economy as the country transitions to the endemic stage, the Malaysian economy registered a positive growth of five per cent in the first quarter of 2022 (Q1 2022) from 3.6 per cent in Q4 2021.

“This was mainly supported by improving domestic demand as economic activities continued to normalise with the easing of containment measures and strong export growth," he said.

Azam added that economic activities are expected to accelerate as the positive effects of the transition to the COVID-19 endemic stage continue to be experienced by all economic sectors, especially with the reopening of international borders.

“On the supply side, the services and manufacturing sectors continued to drive economic growth, expanding by 6.5 per cent and 6.6 per cent, respectively,” he said.

However, SME Bank noted inflationary pressures have increased sharply due to a rise in commodity prices, strained supply chains and strong demand conditions, particularly in the United States. 

As such, several central banks have been tightening their monetary policy settings at a faster pace to reduce inflationary pressures.

It said as of March 2022, Malaysia’s headline inflation was unchanged at 2.2 per cent, while core inflation rose to 2.0 per cent from 1.8 per cent in February. 

“This reflects price adjustments amidst higher costs and improving demand conditions, with price increases being more noticeable specifically for food items due to supply-related factors such as higher global commodity prices,” it said.

--BERNAMA

 

 


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