Expectation after expectation issued by financial institutions on Bank Negara Malaysia's (BNM) Overnight Policy Rate (OPR) was finally answered on 11 May 2022.
Through the Monetary Policy Committee (MPC) meeting, BNM has decided to increase the OPR rate by 25 basis points to 2.00%, with the ceiling level and floor level of the OPR increasing to 2.25%and 1.75%respectively.
The results were achieved based on mounting inflationary pressures and the reopening of the global economic sector, as well as improved labor market conditions in support of the recovery of economic activity.
According to an official statement from BNM, inflationary pressures continued to peak in the United States (US) due to rising commodity prices, supply chain problems and strong demand.
In addition, global growth was also affected by the war conflict in Ukraine, the Covid-19 situation, and financial market volatility.
As a result, some central banks are expected to adjust their monetary policy settings in an effort to control inflation.
The situation in Malaysia saw growth in a favorable position, as a result of strong impetus to domestic demand including sustained export growth.
Meanwhile, the unemployment rate recorded a record low after the country's transition to the endemic phase on April 1, 2022, which further strengthened economic activity after almost 2 years of disruption.
As for investment activities and prospects, it is seen as positive as a result of multi-year project realization support, but the risks are still there with the same issues as above.
Meanwhile, overall inflation is projected to average between 2.2% to 3.2% in 2022, but with the increase in economic activity during cost pressures it is likely that core inflation will rise to an average of 2% -3%.
Nevertheless, price pressures will be partially controlled by existing price controls and continued capacity in the economy.
Concluding BNM's official statement, the MPC decided to start reducing the level of monetary easing gradually to ensure that it can re-support economic growth in an environment of price stability.
