Bank Negara cuts OPR by 50 bps as economic conditions to prove challenging in the first half

Bank Negara Malaysia (BNM) has cut its overnight policy rate (OPR) by 50 basis points (bps) to 2 percent.

The central bank after its Monetary Policy Committee meeting said the ceiling and floor rates for the OPR have been reduced to 2.25 percent and 1.75 percent.

Additionally, the OPR has been reduced by a total of 100 bps as BNM had already cut 50 bps since the start of the year.

According to the Edge Financial Daily, the central bank had cut the OPR by 25 bps to 2.75 percent in January before proceeding with another 25bps cut in March to 2.5 percent.

“The Movement Control Order, while necessary to contain the spread of the virus, has also constrained production capacity and spending,” it said in a press statement.

“Labour market conditions are also expected to weaken considerably and economic conditions would be particularly challenging in the first half of the year,” BNM said.

Inflationary pressures are expected to be muted in 2020 with average headline inflation likely to be negative this year, due to substantially lower global oil prices.

Furthermore, the central bank had assured the financial sector is sound, with institutions operating with strong capital and liquidity buffers.

Since March 2020, BNM has provided additional liquidity of approximately RM 42 billion into the domestic financial markets, and the central bank states it is ready to provide liquidity in the interbank market to ensure orderly market conditions.

“Together, these measures will cushion the economic impact on businesses and households and support the improvement in economic activity. The MPC will continue to monitor the outlook for domestic growth and inflation,” BNM concluded.

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