UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the recent decision by the Bank Negara Malaysia (BNM) to cut rates to 2.50%, the lowest level in the last decade.

Key Quotes

“Bank Negara Malaysia (BNM) cut its Overnight Policy Rate (OPR) for the second straight meeting by 25bps to 2.50% today (3 Mar), the lowest level since Jun 2010. This was in line with Bloomberg consensus though the poll was split (15:9) between a 25bps cut and hold. The next scheduled MPC decision will be on 5 May 2020.”

“BNM highlights key downside risk mainly from the evolving nature and prolonged impact of COVID-19 outbreak as well as continued weakness in commodity-related sectors. Growth particularly in 1Q20 will be affected by the COVID-19 outbreak particularly in the tourism-related and manufacturing sectors, as well as persistent weakness in the agriculture sector.”

“In our view, the tone of the latest monetary policy statement is more dovish and leaves the door open for further rate cuts if necessary. There was a sense of uncertainty on the growth outlook subject to the duration and severity of COVID-19. Hence, we are not ruling out a further 25bps OPR cut in May particularly if there are signs of further weakness to global growth and major central banks stand ready to respond to the COVID-19 outbreak.”