BNM reduced rates by 25 bps – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the recent decision by the Bank Negara Malaysia (BNM) to reduce the policy rate to 2.75%.

Key Quotes

“Bank Negara Malaysia (BNM) cut the Overnight Policy Rate (OPR) by 25bps to 2.75% today (22 Jan). Only 2 out of 26 economists polled by Bloomberg expected the rate cut. We pencilled in a rate cut in 1Q 2020. The next scheduled MPC decision will be on 3 March 2020.”

“BNM said the cut was a pre-emptive measure to secure growth amid price stability. Policymakers cited that the global economy continues to expand at a moderate pace with the recent dissipation of trade tensions pointing to improving trade activity. However, downside risks to Malaysia’s economy remain, including uncertainties from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects.”

“We think BNM will keep the OPR on hold for now to allow the stimulus effect to run through the economy. Today’s rate cut helps to extend the stimulus effect from the previous OPR cut in May 2019.”