Julia Goh, Senior Economist and Loke Siew Ting, Economist at UOB Group, reviewed the recent decision by the BNM to keep rates unchanged.
Key Quotes
“Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) unchanged at 3.00% for the third time. Today’s meeting is the last scheduled monetary policy meeting for the year. The statutory reserve requirement ratio (SRR) was also kept unchanged at 3.50%”.
“Despite rate cuts by US Fed and regional central banks including Indonesia, South Korea, and Philippines, BNM has kept a cautious “wait-and-see” stance since the rate cut in May. In today’s monetary policy statement, BNM continued to maintain a neutral tone and cautioned on downside risks to both global and domestic growth going into 2020″.
“With Malaysian exports worsening at a faster-than-expected pace of late and business confidence remaining weak, we stick to our view of another “pre-emptive” 25bps cut in OPR to 2.75% by 1H20 to further safeguard growth. This is in addition to the mildly expansionary budget for 2020, benign inflation expectations and lagged effect of the previous rate cut in May that are currently supportive of domestic growth moving into 2020. Although the recent progress between US and China to sign a “Phase 1″ trade deal has helped allay concerns of further tariffs and escalation of tensions that would threaten near-term growth, there is still a long way towards full resolution”.
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