KUALA LUMPUR: Macro policies such as the overnight policy rate (OPR) must be adjusted in line with the economy gaining strength, Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus said.
She said this is necessary to ensure that our broad macro policies match our economic realities.
"At the same time, we recognise that although the overall economy is in good health, there are some who are still facing economic challenges. "
However, given that the OPR is by design a blunt tool to deliver price stability, more targeted measures are in place to help those who may be facing difficulties in meeting their monthly loan repayments," she said during the welcoming remarks at the launch of BNM Sasana Symposium 2023 here today.
Nor Shamsiah noted that help continues to be available through banks or Agensi Kaunseling dan Pengurusan Kredit (AKPK), which can work out new repayment arrangements tailored to individual circumstances.
She said in this way, policies can work to deliver what the economy needs.
Meanwhile, the governor also said by acting sooner rather than later in managing inflation, Malaysia has been able to move in a measured and gradual way, avoiding large and more disruptive adjustments which would have been much more costly for the economy.
She said the country is still experiencing high and elevated inflation, partly due to strong demand. She emphasised that some cost pressures are coming down, but it has not translated to the final prices of goods because demand remains high.
"If we do not manage excessive price pressures like we see in some other economies, this will affect everyone through lower purchasing power.
"The B40 and vulnerable groups are the ones who will be the most affected if we let inflation get out of hand, and we will not be able to preserve sustainable growth over the longer term," she said.
Speaking on the ringgit performance, Nor Shamsiah said the central bank's role is to make sure that its value does not swing too fast or too much either way, and to allow an orderly price discovery.
She noted that under a flexible exchange rate, it is reasonable for the ringgit to fluctuate from time to time.
She said these adjustments allow the domestic economy to adjust to global economic and financial shocks.
"We saw this during the Federal Reserve's rapid and large interest rate adjustments last year, which caused huge shocks to the global economy. "
"At one point, the ringgit declined as much as 11.5 per cent between end-March to early November, before appreciating by 7.8 per cent towards the year end. "Yet the real economy grew by 8.7 per cent during the year, thanks in no small part to the ringgit's role as a shock absorber," she said.
Nor Shamsiah said Malaysia needs structural reforms that will strengthen the country's growth prospects and encourage more investment opportunities to increase demand for the ringgit and secure a more enduring appreciation in its value over time.
She added that ultimately, to secure our future, the country must stay the course in implementing vital reforms.