We expect BNM to cut policy rates by 50bps in May, says StanChart Global Research

Standard Chartered Global Research (StanChart) expects Bank Negara Malaysia (BNM) to cut the overnight policy rate by 50bps to 2 percent on May 5.

The research house also expects the central bank to continue to ease a further 25bps in July which would take the policy rate 1.75 percent, lower than the 2 percent reached during the 2008/2009 global financial crisis.

“Even though the March monetary policy statement was balanced rather outright dovish, we believe the economic situation has worsened meaningfully,” StanChart said.

Additionally, given that BNM has already cut 50bps since the start of the year, StanChart opines a 50bps cut in May would be appropriate.

This the research house believes will provide the balancing to extend monetary policy support and stability in monetary policy decisions.

According to StanChart, growth projections remain highly uncertain. While fiscal pledges are significant, indirect support, such as loan moratoriums to individuals and businesses from banking institutions account for the bulk of support.

“Malaysia has relatively high household leverage, which should benefit from rate cuts. For example, we estimate that a 50bps cut to the mortgage rate may help households svae around 0.4% of GDP per annum,” the research house said.

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