Bank Negara's MPC decides on OPR, says Tengku Zafrul

He said this regarding Bank Negara Malaysia's announcement yesterday that the overnight policy rate (OPR) was raised by 25 basis points (bps), bringing the current rate to 2.25 per cent, while the ceiling and floor rates of the OPR increased to 2.50 and 2.00 per cent.

"We cannot 'coordinate' the decision because this is against the law. This is important because it has to do with trust in the market, if there were any manipulation or government intervention in any monetary policy decision, this affects the integrity of the market as well," he told a press conference after launching the Edotco 2021 action plan and sustainability report here today.

He stressed that, most importantly, Malaysia needs to improve the economy and continue to monitor this matter given that the country has seen strong first-quarter gross domestic product growth for the year at five per cent.

MPC's decision to raise the OPR rate was also made taking into account the ever-increasing inflationary pressures following global inflationary pressures, said the minister.

Tengku Zafrul said the phenomenon was due to the development of global commodity prices caused by the ongoing military conflict in Ukraine, as well as protracted supply-related disruptions and the MPC's decision was also to curb investment outflows from the country, which would lead to severe ringgit depreciation.

"We can see that the interest rate differential between Malaysia and the United States continues to rise. If the OPR remains, it is certain that investors will shift their investments there," the minister said.

He also said that although Malaysia's OPR had risen 50 bps since the beginning of the year, other countries had seen their interest rates rise even more.

For example, the United States 150 bps; New Zealand 125 bps; the United Kingdom 100 bps; South Korea 75 bps and India 90 bps.

"Malaysia's OPR increase is also in line with 'market expectations' and should be assessed taking into account the latest regional developments as well as the historical OPR rate.

"So far, the 2.25 per cent rate is lower than the country's OPR rate before COVID-19 hit, which is around 3.0 to 3.1 per cent," he noted.

Tengku Zafrul explained that central banks around the world have made adjustments in their monetary policies to reduce the effects of inflationary pressures, and there are even central banks that are implementing the OPR revision at a faster rate.