BNM cuts OPR by 25 bp to 2.50% – the lowest in almost 10 years

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© Abdul Razak Latif | 123rf

3 March, KUALA LUMPUR – The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) decided to reduce the Overnight Policy Rate (OPR) by 25 basis points to 2.50 per cent at its meeting today.

In a statement today, BNM said the ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.75 per cent and 2.25 per cent, respectively.

“The reduction in the OPR is intended to provide a more accommodative monetary environment to support the projected improvement in economic growth amid price stability. The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation,” it said.

The central bank said that global economic conditions have weakened in the recent period, with the ongoing COVID-19 outbreak having disrupted production and travel activity, especially within the region.

READ: BNM reduces OPR to 2.5% due to Coronavirus – How will it affect your home loan?

“This has also led to greater risk aversion, resulting in tighter financial conditions and a resurgence in financial market volatility. Downside risks to the global growth outlook have increased, particularly in the near term.

“However, a number of countries have implemented policy responses. With further anticipated policy measures, these actions are expected to mitigate the economic impact of COVID-19,” it said.

Looking ahead, BNM said growth, particularly in the first quarter, will be affected by the COVID-19 outbreak primarily in the tourism-related and manufacturing sectors while the weakness in the agriculture sector is also likely to persist in the first quarter.

“For 2020, private and public sector activities will be supportive of growth. Household spending is expected to grow at a slower pace amid moderate employment and income growth.

“Investment activity is projected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors,” it said, adding that the 2020 economic stimulus package will also provide some support to economic activity.

Although domestic growth is expected to gradually improve in the second half of the year, BNM said there are key downside risks, mainly stemming from the evolving nature and prolonged impact of the COVID-19 outbreak, and continued weakness in commodity-related sectors.

“In 2020, headline inflation is expected to average higher but remain modest. The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings.

“Underlying inflation is expected to be more moderate, amid limited demand pressures despite the continued expansion in economic activity,” it added.

– BERNAMA

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