THE overnight policy rate (OPR) can remain at 2.75% if the country’s inflation rate continues to ease in coming months, Economy Minister Rafizi Ramli said. 

He said food prices are the largest contributor to inflation (measured by the consumer price index) in the domestic market. 

“If the inflation rate continues to ease in January and February with the OPR at 2.75%, it would indicate that the OPR can be maintained at 2.75%,” he told a press conference today to explain the relationship between reporters in a briefing on the function of OPR increase to curb inflation hike in Putrajaya today. 

On Friday, the Statistics Department announced that the inflation rate eased to 3.8% in December 2022 from 4% in November 2022. 

Rafizi said in theory, Bank Negara Malaysia (BNM) would use monetary policy via the OPR to curb rising inflationary pressures in the local market. 

“When inflation rises at a faster pace, you would want to limit demand, and the way to do it is to increase the OPR.

“We can still taper down inflation while maintaining the OPR. If we become more price aware, we can hopefully maintain the kind of OPR the public wants,” he said.

He said the country’s inflation rate appears to be easing, which is a good sign for efforts to control inflation and return it to the normal level of around 2%.

Rafizi said that last year, inflation peaked in August and September at 4.7% and 4.5%, respectively. 

“The graph is seen to be going down and that is a good sign. We hope it will gradually return to a more normal level of inflation, which is the previous level of about 2%,” he added.

On January 19, the Monetary Policy Committee of BNM decided to maintain the OPR after four consecutive increases.

The rate hikes of 25 basis points each in May, July, September and November last year brought the OPR to 2.75% from a historic low of 1.75%. – Bernama, January 25, 2023.