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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the decision by the Bank Negara Malaysia (BNM) to cut the policy rate to 1.75%.

Key Quotes

“Bank Negara Malaysia (BNM) cut the policy rate for the fourth time to-date. The Overnight Policy Rate (OPR) was reduced by 25bps to 1.75%. A Bloomberg poll was mixed with 14 expecting 25bps rate cut, four expecting 50bps cut, and seven (including us) expecting no change.”

“Today’s decision was closely watched in view of the ongoing pandemic and growth risks, as well as recent political developments. The latest cut aims to provide additional policy stimulus to accelerate the pace of economic recovery. This follows three successive reductions and a sizeable fiscal package of MYR295bn (or 20% of GDP) announced in 1H 2020.”

“Given that BNM is keeping the door open for further rate cuts amid projected deflation this year, we are now pencilling in another 25bps cut to end the year at an unprecedented low of 1.50%. There are two more monetary policy meetings this year on 10 Sep and 3 Nov.”