BNM to cut the OPR by 50 bps to 2% to help cushion economic impact on businesses and households.
Bank Negara Malaysia (BNM) has cut the Overnight Policy Rate (OPR) by 50 bps to 2.00%. The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.25 percent and 1.75 percent, respectively.
With today’s cut, the OPR has been reduced by a total of 100 bps this year to help cushion the economic impact on businesses and households and support the improvement in economic activity.
“Recent indicators show that the global economy is already contracting, with global growth projected to be negative for the year. Financial conditions have also tightened amid elevated risk aversion and uncertainty,” said BNM in a statement today.
Countries across the world have introduced substantial policy stimuli to mitigate the economic impact of COVID-19. For Malaysia, domestic economic conditions have similarly been affected by the pandemic.
With global widespread containment measures and international border closures, the weak external demand environment will exert a larger drag on domestic economic activity. In addition, the Movement Control Order (MCO), while necessary to contain the spread of the virus, has also constrained production capacity and spending.
Economic conditions would be particularly challenging in the first half of the year. The fiscal stimulus measures, alongside monetary and financial measures will, however, offer some support to the economy.
Inflationary pressures are expected to be muted in 2020, with average headline inflation likely to be negative this year, due mainly to projections for substantially lower global oil prices. Underlying inflation is expected to be further subdued given the projections of weaker domestic growth prospects and labour market conditions, it cautioned.
BNM however assured that Malaysia’s financial sector remains sound, with financial institutions operating with strong capital and adequate liquidity buffers.
Since March 2020, BNM has provided additional liquidity of approximately RM 42 billion into the domestic financial markets, and the central bank states it is ready to provide liquidity in the interbank market to ensure orderly market conditions.
“Together, these measures will cushion the economic impact on businesses and households and support the improvement in economic activity. The Monetary Policy Committee (MPC) will continue to monitor the outlook for domestic growth and inflation,” BNM concluded.