Lim Guan Eng questions BNM on OPR hike and inflation

Lim said in a Facebook post today that the recent surprise hike in the OPR by Bank Negara Malaysia (BNM) has created confusion among economists and business groups.

“BNM governor Tan Sri Nor Shamsiah binti Mohd Yunus justified the hike by expressing concern over core inflation, which remained at elevated levels. The reasoning provided by Nor Shamsiah of wanting to guard against resurgent inflation as the justification for the surprising hike in the OPR recently has created some confusion.

“Why is inflation a problem now necessitating an OPR hike but not a problem then in January and March 2023 when BNM paused hikes in OPR?” he asked.

Nor Shamsiah’s concern that core inflation remained at elevated levels, necessitating an OPR hike has confused a lot of people.

“This has caused some confusion because core inflation had in fact moderated to 3.9% in the first quarter of 2023 (announced in April this year) as compared to the final quarter in 2022 of 4.2% (announced in January this year).

“If core inflation is such a big concern, why were there two interest rate pauses of no hikes in OPR by BNM in January and March 2023, even though core inflation was higher at 4.2% during the final quarter of 2022 as compared to 3.9% in the first quarter of 2023,” he said.

The surprise hike in the OPR has caused unnecessary financial hardship to borrowers, particularly individuals and small and medium-sized enterprises (SMEs).

The move has raised concerns among economists and business groups that the 5.6% first-quarter GDP growth may not be sustainable.

Policy alignment between the federal government’s looser fiscal policy and BNM’s benign monetary policy has facilitated economic growth.

However, the surprise hike in the OPR may make it difficult for Malaysia to repeat the strong first-quarter GDP growth in the second quarter of 2023. — May 14, 2023