It’s just been announced. Here’s the Bank Negara Malaysia (BNM) website for the full announcement. Briefly, these are what BNM is saying with this reduction in Overnight Policy Rate (OPR).
Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) to 2.75 percent. The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 3.00 percent and 2.50 percent, respectively.
The reason for it in doing so is because the global economy is expanding at a moderate pace. Article here on world growth which is not such a good sign. Downside risks include geopolitical tensions and political uncertainties in some countries. For 2020, Malaysia’s growth is expected to improve gradually. Overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors.
Downside risks include uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects.
In fact this adjustment is a pre-emptive measure to secure the improving growth trajectory amid price stability. At this current level of the OPR, the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability. Here’s the Bank Negara Malaysia (BNM) website for the full announcement.
By the way, when rates are down, it does not mean everyone is happy yeah. For home buyers, they will rejoice. For retirees with fixed deposits in banks, their returns will drop in tandem. What this will mean is that they may need to look for investments which could return better returns instead. Many businesses may also choose to expand their businesses since the cost of borrowing is now lowered.
Very briefly (without all the economic jargons), the reason why rates are also lowered is also partly because the business confidence may not be as high as what BNM thinks and thus this will help to spur a continuous growth from businesses. With expansion, it also meant more jobs and this will then lead to higher consumption for example. In other words, BNM wants to ensure what has been projected for 2020 for GDP growth will continue to become true. Happy understanding. House buyers, your chance is here.
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