By DayakDaily Team
KUCHING, July 9: Bank Negara Malaysia (BNM) has cut the overnight policy rate (OPR) by 25 basis points to 2.75 per cent in a pre-emptive move to preserve Malaysia’s growth momentum as global uncertainties loom, marking its first interest rate change since May 2023.
The central bank announced the decision today, citing that while Malaysia’s domestic economy remains on strong footing, external headwinds including weaker global trade, subdued sentiment and lower-than-expected commodity output pose risks to the country’s economic outlook.
“The reduction in the OPR is a pre-emptive measure aimed at preserving Malaysia’s steady growth path amid moderate inflation prospects,” BNM said in a statement, as reported by The Edge Malaysia.
The move came as a surprise to some, with only about half of the 23 economists polled by Bloomberg predicting a rate cut, while the rest had expected a pause.
Wednesday’s decision follows an earlier step by BNM to lower the statutory reserve requirement ratio, the amount of cash banks must hold in reserve, to its lowest level in 14 years to further inject liquidity into the financial system.
In a broader economic context, Malaysia was caught off guard on Tuesday after US President Donald Trump abruptly announced a 25 per cent import tariff on all Malaysian goods, although he left room for negotiations before a new deadline on August 1. The Malaysian government has since pledged to continue engaging the US diplomatically.
BNM said favourable outcomes from trade negotiations could improve growth prospects. However, it warned that the balance of risks remains skewed to the downside.
Despite the external pressures, Malaysia’s economic activity is expected to remain robust in the second quarter, supported by resilient domestic demand, sustained household spending, and continued implementation of public and private investment projects.
BNM also noted that inflation remains moderate and is expected to stay contained due to the absence of global cost shocks and excessive domestic demand.
“In this environment, the overall impact of the announced and upcoming domestic policy reforms on inflation is expected to be contained,” the central bank added. — DayakDaily
