Fundamentals, not the OPR, will support the ringgit FMTNews FMTEng
The economy grew by 8.7% in 2022 and by 5.7% in Q1 2023 with 4% to 5% forecast for the full year. Inflation is now around 2.8% and will fall toward 2.5% in the next few months.
Inflation is 5.1% and the economy grew at 3.6% in 2022, less than half the rate of Malaysia. It actually contracted on a quarterly basis in Q1 2023, the first stage of a technical recession. The damage to underlying fundamentals would severely harm the ringgit and we would get exactly the opposite of what was intended.
There is nothing in the current exchange movements that would affect this mandate because inflation is falling, the financial sector is stable and the economy is expected to grow at 4% to 5%. Apart from this, BNM can do very little if anything to systematically influence the ringgit in the short-term as we have seen from recent hikes in the OPR.
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