Gradual increase in OPR does not cause significant impact - Mohd Shahar

Any decision made by Bank Negara Malaysia (BNM) to adjust the monetary policy in the future would be implemented in a controlled manner and gradually so that it would not affect the country's economic recovery momentum, he said.

Mohd Shahar said BNM is of the view that the gradual rise in OPR would not have a significant effect especially for the B40 group.

"This is because one-third of loans by the B40 group are at fixed rate, most of which are for buying cars and personal financing," he said during the question-and-answer session at the Dewan Negara sitting today.

He was replying to a question from Senator Aziz Ariffin on the field study implemented by the government on the preparedness of the people when the OPR is increased.

Mohd Shahar said BNM through the Monetary Policy Committee decided to adjust the OPR gradually via the increase of 25 basis points (bps) in May 2022 and 25 bps in July 2022 to 2.25 per cent currently.

He said If the OPR is increased hastily and at a large magnitude, it could hinder the economic grwth and affect the well-being of the people such as what happened in the United States, the Philippines and Turkey, which recorded inflation rate of 9.1 per cent, 6.1 per cent and 78.6 per cent respectively.

Hence, he said the government through BNM would like to stress that varous aid programmes are still available for the vulnerable borrowers.

"This includes facilities under BNM's Fund for Small and Medium Enterprises, targeted loan repayment assistance by banks, as well as advisory services under various Credit Counselling and Debt Management Agency programmes."

Meanwhile, he said the inflation rate in 2022 is expected to record between 2.2 per cent to 3.2 per cent while headline inflation from January to June was 2.5 per cent.

He added that experience worldwide have shown that high inflation rate could give a bad impact on the economy and living status of the people.

"The rise in inflation is not only driven by supply side pressures, in fact, it has shown indications of demand pull inflation.

"If this matter is not addressed early, domestic demand if in excess can add to the inflationary pressures," he said.

Mohd Shahar said if the inflation situation becomes uncontrollable, the higher prices of goods would affect households' purchasing power particularly for the low-income group.