Bank Negara Malaysia (BNM) has announced another overnight policy rate (OPR) cut by 25 basis points, bringing the current OPR from 2.75% to 2.50%. The ceiling and floor rates of the OPR are now reduced to 2.75% and 2.25%, respectively.
According to BNM, this cut is meant as a countermeasure for the economic impact of the Covid-19 outbreak. Malaysia’s economy has seen a dip due to the ongoing outbreak, causing disruptions in production and travel activities. This further led to tighter financial conditions and a volatile market.
As such, the OPR reduction is intended to provide a more accommodating financial environment for businesses and the nation in general. This, along with the 2020 Economic Stimulus Package recently introduced, is expected to encourage and support the country’s future economic growth amid price stability.
The OPR is essentially the reference rate that banks use to decide on the interest rate of your savings and loans products. A lower OPR is good news for variable-rate loans, such as home loans. However, it may be less advantageous for your savings accounts and fixed deposits as it means these savings products will have a lower interest rate earning.
This is the second OPR cut in the last three months this year, with many economic analysts having predicted it prior. The Monetary Policy Committee (MPC) had announced an earlier cut in January 2020, where the OPR was reduced from 3.00% to 2.75%.