OPR decisions are based on domestic economic environment - BNM governor

Speaking at a press conference today, she said the Monetary Policy Committee (MPC) would continue to calibrate the monetary policy to ensure sustainable domestic growth and price stability, which is in line with BNM's mandate.

"I want to stress... we do not set our OPR based on other central banks' decisions on their monetary policy," she said after announcing Malaysia's gross domestic product results for the fourth quarter of 2022 here today.

The MPC maintained the OPR at 2.75 per cent during its first meeting in January 2023 after raising the rate by 25 basis points four times last year. The last hike was to increase the OPR to 2.75 per cent in November 2022.

Nor Shamsiah said the pause would allow BNM to have better clarity and take stock of the impact of the cumulative increases in the OPR in 2022 as well as take into account the economic environment and its impact on the growth and inflation outlook.

She noted that Malaysia's current inflation was the result of a combination of both supply and demand factors.

"While we know that the OPR has a limited influence in addressing cost-push price pressures, it is an important tool to manage demand pressures. We have been seeing these demand pressures since the economy reopened, which contributed to the persistence and pervasiveness of domestic inflation.

"This has been the challenge of central banks around the world, with some facing pressing demand pressures more than others, hence, the rather aggressive monetary policy tightening in those economies," added Nor Shamsiah.

Asked about potential signs of distress in loan repayments, she pointed out that loan repayments for businesses were on the uptrend while loan repayments by households had always been sustained.

Nor Shamsiah said household debt servicing capacity continues to be supported by improving income and employment conditions, healthy loan servicing buffers at 37 per cent median debts service ratio of outstanding loans, and continued availability of repayment assistance.

"When you look at the strength of any household or business, you have to look at both financial assets and financial liabilities. Just looking at increases in the OPR on debt servicing may not give you the whole picture," she added.

Nor Shamsiah said that at the current OPR level, Malaysia's monetary policy remained accommodative and supportive of the economy.

"We acknowledge the delicate balance between inflation and growth risks, especially in the context of the challenging environment we are currently facing," she added.