PETALING JAYA: In a rare move, Bank Negara Malaysia (BNM) today made a back-to-back cut to the Overnight Policy Rate (OPR) by a further 25 basis points to 2.5%, the lowest since May 2010.
In a statement, the central bank said the ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.75% and 2.25%, respectively.
Its last trim was just in January this year, when it brought the key interest rate to 2.75% from 3%.
The central bank noted that the ongoing Covid-19 outbreak has disrupted production and travel activity, especially within the region, which has led to greater risk aversion, tighter financial conditions and a resurgence in financial market volatility.
“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.
Looking ahead, growth, particularly in the first quarter, will be affected primarily in the tourism-related, agricultural and manufacturing sectors.
Household spending is also 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
However, domestic growth is expected to gradually improve in the second half of the year, with headline inflation 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 said.