PETALING JAYA: Bank Negara Malaysia (BNM) has decided to further lower the Overnight Policy Rate (OPR) by 25 basis points to 1.75%, following its Monetary Policy Committee meeting today.
The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2% and 1.5%, respectively.
In a statement, the central bank pointed out the impact of Covid-19 on the global economy has been severe, and although a trough is expected in the second quarter, broad-based weakness in labour markets and precautionary behaviour by households and businesses could affect the recovery going forward.
“The reduction in the OPR provides additional policy stimulus to accelerate the pace of economic recovery. The MPC will continue to assess evolving conditions and their implications on the overall outlook for inflation and domestic growth. The Bank will continue to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery,” it said.
It pointed out that following the gradual and progressive re-opening of the economy since early May, economic activities have begun to recover from the trough in the second quarter, the pace and strength of the recovery, however, remain subject to downside risks emanating from both domestic and external factors.
“These include the prospect of further outbreaks of the pandemic leading to re-impositions of containment measures, more persistent weakness in labour market conditions, and a weaker-than-expected recovery in global growth.”
Additionally, inflationary pressures are expected to be muted in 2020.
Average headline inflation is likely to be negative this year, primarily reflecting the substantially lower global oil prices. The risks of a broad-based and persistent decline in prices are assessed to be limited as economic activity resumes and demand conditions improve.
Nevertheless, the outlook remains significantly affected by global oil and commodity prices. Underlying inflation is expected to be subdued and within expectations.
In a separate statement, BNM said its international reserves amounted to US$103.4 billion as at June 30. The reserves position is sufficient to finance 8.3 months of retained imports and is 1.1 times total short-term external debt.
