5 May - 2 min read
Bank Negara Malaysia (BNM) is expected to make yet another overnight policy rate (OPR) cut today, this time by a large 50 basis points (bps), according to several economists surveyed by Bloomberg. This would cause the country’s OPR to decrease from the current 2.5% to 2.0%, and is meant to encourage economic growth as the government begins relaxing the movement control order (MCO).
If carried out, this reduction will be the third to be made this year, and will be the largest cut in more than a decade. Prior to this, BNM had already introduced a first and second OPR cut in January and March 2020, respectively. The first cut brought the rate down from 3.00% to 2.75%, and then subsequently 2.75% to its current 2.5%.
“Bank Negara Malaysia may cut its policy rate by 50bps to 2.00% on Tuesday. The economic outlook has changed dramatically since BNM’s previous policy meeting on 3 March. The coronavirus became a pandemic, governments worldwide (including Malaysia) locked down their economies to contain the spread, and financial markets melted down in an historic fashion,” said an ASEAN economist, Tamara Mast Henderson.
This prediction comes as the government announced the relaxation of the MCO, which was estimated to have cost Malaysia a total of RM63 billion. The country is set to fully lift its restrictions on 12 May 2020.
Prime Minister Tan Sri Muhyiddin Yassin also said that his administration will work with the central bank and other agencies to draft both short- and long-term strategies for the country’s post-MCO economic recovery plan to revive the economy.
CGS-CIMB Securities, too, had earlier predicted that BNM may further reduce the OPR by another 75bps throughout year 2020 with a third and fourth cut. The research house expected the central bank to implement a 50bps cut in May 2020, followed by another 25bps cut in the second half of the year.
For the Malaysian public, an OPR cut means that you will get lowered interest rates for both savings and loans. This may be good news for those on a variable-rate loan (such as home loans) or those who wish to take out a future loan. However, you will also be earning less for your savings accounts and fixed deposits.
(Source: Free Malaysia Today)
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