News: Bank Negara Slashes OPR To 2%

May 6, 2020

Bank Negara Malaysia (BNM) has slashed its Overnight Policy Rate (OPR) by 50 basis points to 2%. It correspondingly reduced the floor and ceiling rates of the OPR corridor to 1.75% and 2.25%, respectively.

This came as the global economic conditions have significantly weakened, with measures to curb the spread of the Covid-19 pandemic disrupting the economic activities across most countries, reported The Borneo Post.

“Recent indicators show that the global economy is already contracting, with global growth projected to be negative for the year. Financial conditions have also tightened amid elevated risk aversion and uncertainty,” said the central bank in its statement.

“Substantial policy stimuli introduced by many economies, coupled with the gradual easing of containment measures globally, would partially mitigate the economic impact of Covid-19. Growth prospects should improve in 2021 with the expected containment of the pandemic.”

Read all about Overnight Policy Rate and understand how this can affect you! 

With the move, the OPR has been cut by a total of 100 basis points, complementing BNM’s other monetary and financial measures as well as fiscal measures for 2020.

BNM expects the measures to cushion the economic impact on households and businesses, while supporting the improvement in economic activity.

“With more businesses allowed to operate under the Conditional Movement Control Order, economic activity is projected to gradually improve,” it said.

However, BNM noted that the outlook for growth is still subject to a high degree of uncertainty, especially with respect to developments on the pandemic.

“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,” it explained.

“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.”

 

Image source from Bank Negara Malaysia 

 

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