KUALA LUMPUR: Bank Negara Malaysia (BNM) is looking into the dynamic changes in inflation to consider the appropriate price stability level that will continue to support sustainable growth going forward.
Governor Tan Sri Nor Shamsiah Mohd Yunus said this is a matter that many other countries are looking into, not only Malaysia.
She said this during a question-and-answer session following the launch of the central bank’s 2022 annual report today, in response to whether three per cent is the new norm for inflation compared with the historical low of 2.2 per cent since the inflation rate is expected to remain elevated around 3.0 to 3.8 per cent this year.
“We need to continually be vigilant against economic uncertainties. We are not out of the woods yet. So it is very important for the Monetary Policy Committee to assess the evolving conditions and their impact on growth and inflation.
“Monetary policy has a role to play and if we feel that demand conditions are stoking price pressure further on the people, obviously this would mean it needs to be recalibrated for them,” she said.
On terminal interest rate, Nor Shamsiah noted that it is hard to pin a number because of the rapidly evolving conditions and this could be seen in other countries as well where the terminal rate keeps on changing.
Thus, for BNM, it is very important to continue to be able to assess the evolving conditions under the current uncertainty period and their impacts on outlook, and continue to be agile to respond accordingly to achieve price stability and sustainable growth, she said.
On the subsidy rationalisation move, she commented that blanket subsidies are not sustainable and will need to be rationalised.
“We recognise that our policy pathways need to be rebuilt so that the economy would be in a better position to deal with future shocks.
“It can be argued that it can never be the right time, but it is something that needs to be done, and there are ways to do it to mitigate the impact,” she said.
Nor Shamsiah said, by rationalising the current subsidy schemes, the potential savings can be rightfully channelled to benefit vulnerable groups that need it the most.
The current form of subsidies, she noted, are disproportionately enjoyed by those that do not deserve it and thus, creating an imbalance.
Undertaking the rationalisation will also ensure fiscal sustainability and enable the country to strengthen its social protection system, apart from progressing towards a greener economy, she added. - Bernama