Bank Negara Malaysia (BNM) today reduced the Overnight Policy Rate (OPR) by 50 basis points (bps) to 2.00%.

“The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.25% and 1.75%, respectively,“ BNM said in a statement today.

The OPR has been reduced by a total of 100bps this year, complementing other monetary and financial measures by BNM as well as fiscal measures.

The central bank said widespread containment measures globally, international border closures and the consequent weak external demand environment will exert a larger drag on domestic economic activity.

It said the movement control order (MCO), while necessary to contain the spread of the virus, has also constrained production capacity and spending. Labour market conditions are also expected to weaken considerably. Economic conditions would be particularly challenging in the first half of the year.

The fiscal stimulus measures, alongside monetary and financial measures will, however, offer some support to the economy. With more businesses allowed to operate under the conditional MCO, economic activity is projected to gradually improve.

“The outlook for growth continues to be subject to a high degree of uncertainty, particularly with respect to developments surrounding the pandemic,“ BNM said.

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

“Nevertheless, the outlook remains significantly affected by global oil and commodity prices, as well as evolving demand conditions. Underlying inflation is expected to be subdued given the projections of weaker domestic growth prospects and labour market conditions.”

Meanwhile, BNM said Malaysian government securities and Malaysian government investment issues can be used by banking institutions to fully meet the Statutory Reserve Requirement (SRR) compliance effective May 16, 2020.

“This flexibility is available until May 31, 2021. This measure will release RM16 billion worth of liquidity into the banking system. The SRR ratio remains unchanged at 2.00%.”

This measure is part of BNM’s continuous efforts to ensure sufficient liquidity to support financial intermediation activity.

Source: TheSunDaily.my