Should such a scenario materialize, a policy mix of low policy rate and high reserve requirement ratios may be implemented for a long period, both to balance domestic and foreign demand and for macroprudential purposes. If global economic problems further aggravate and domestic economic activity assumes a stagnation trend, we may have to utilize all policy instruments with their effect being on the easing side. Although downside risks persist, there are also upside risks regarding global economy, particularly driven by the lagged impacts of the exceptionally loose policies implemented by the advanced economies over the past two years. If the global economy assumes a faster-than-expected recovery, global inflationary pressures may occur and thus trigger a tightening in the monetary policies of advanced economies. The materialization of such a scenario would mean higher global interest rates and domestic demand-driven inflationary pressures, and thus necessitate increasing both policy rates and reserve requirements. Oil and other commodity prices have displayed rapid increases in the recent period. If the rise in commodity prices persists, this may have implications on the general pricing behavior given the strong pace of domestic demand. Should such a risk materialize in the upcoming period and hamper the attainment of medium-term inflation targets, there may be stronger tightening than was envisaged in the baseline scenario. However, the policy mix may vary depending on the developments regarding foreign demand, capital flows, and the outlook for credit growth. We will continue to closely monitor fiscal policy developments while formulating our monetary policy.

Nor Shamsiah Mohd Yunus: Remarks - Green Swan 2021 Global Virtual Conference Remarks by Ms Nor Shamsiah Mohd Yunus, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Green Swan 2021 Global Virtual Conference, 4 June 2021. * * * I am pleased to be in this panel. If there is anything history, or more recently the pandemic has taught us, it is that, in the face of existential threats, a collective and well-coordinated response is crucial. Central banks and regulators are uniquely placed to mobilise and coordinate climate action with other actors. Given the central role of the financial system in any economy, central banks and regulators have significant influence and a direct interest in actions by financial institutions to manage climate-related risks. The policy and supervisory steer that central banks and financial regulators provide have important consequences for progress by economic agents in strengthening climate risk mitigation and adaptation. Furthermore, as advisors to the Government on economic and financial policies, central banks and regulators often play a key role in helping Governments navigate an orderly transition to a low-carbon economy. I’d like to focus my remarks today on how we are working with the industry and other financial regulators to respond to the climate challenge. JC3 and its evolution In Malaysia, Bank Negara Malaysia and the Securities Commission have established the Joint Committee on Climate Change (or JC3) with the financial industry to promote alignment on climate actions across multiple stakeholders.