The price of goods and services are expected to decline after the newly formed government announced that the Goods and Service Tax (GST) will be reduced to 0% beginning June 1 this year.
Bank Negara Malaysia (BNM) Governor Tan Sri Muhammad Ibrahim said it was important for the relevant authorities to ensure that businesses will implement the new adjustment.
He said it is also likely to have an impact on inflation, but it was too premature to estimate the inflation rate.
“The inflation rate for the first quarter is set at between two and three percent, but with the information coming in, we will look at it again. If need be, we will revise the rate,” he said.
Meanwhile, in terms of the monetary policy, he said BNM will wait for the initiatives, which are currently being discussed by the Team of Eminent Persons, to be assessed in a bid to the change of forecast of 5.6% to 6% this year. However, this will be announced together with the Ministry of Finance.
Muhammad added BNM will also discuss the fiscal deficit and the various initiatives to adjust the monetary policy.
He added that the ringgit remained stable despite the change in government.
“There will be a lot of noises in the short term that would affect the ringgit but in the medium and long-term, the ringgit would adjust to reflect the economic fundamentals,” he added.
BNM will also provide the necessary liquidity to the market if there is a spike in the currency market.
He said the intervention was imperative to ensure the market would adjust to the market in a smooth manner.
Furthermore, the ringgit moved from above RM4 a year ago to below RM4 against US dollar, which showed it was tracking the economic fundamentals.