Bank Negara Slashes OPR By 50 Basis Points To 2.0%

Bank Negara Malaysia (BNM) has reduced its overnight policy rate (OPR) by 50 basis points from 2.5% to 2.0% – its lowest level in ten years. The ceiling and floor rates of the OPR corridor have been correspondingly lowered to 2.25% and 1.75% respectively.

In a statement, the central bank said that measures to contain the Covid-19 pandemic have disrupted economic activity across most economies worldwide, including in Malaysia. “The Movement Control Order, while necessary to contain the spread of the virus, has also constrained production capacity and spending,” said BNM.  “Labour market conditions are also expected to weaken considerably. Economic conditions would be particularly challenging in the first half of the year.”

However, Bank Negara stated that the fiscal stimulus measures, alongside monetary and financial measures will offer some support to the economy.

bank negara malaysia

With today’s decision, the OPR has been reduced by a total of 100 basis points this year, with the first cut from 3.0% to 2.75% made in January and the second to 2.5% in March. According to BNM, the OPR reduction will complement its other monetary and financial measures and fiscal measures as well. “Together, these measures will cushion the economic impact on businesses and households and support the improvement in economic activity,” the central bank added.

The move to cut the OPR had been widely predicted by several economists surveyed by Bloomberg after the Malaysian government announced a relaxation of the movement control order (MCO) nationwide. CGS-CIMB Securities is also predicting that BNM will introduce a further cut in the OPR before the year is over.

(Source: Bank Negara Malaysia)

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