BANK Negara Malaysia (BNM) has “ample room” to implement another overnight policy rate (OPR) cut given the country’s low inflation environment, said TA Research.
A pronounced contraction of gross domestic product (GDP) numbers is expected in the second fiscal quarter (2Q20), the research house said in a note today, based on its reading of the central bank’s July 7 statement that announced an OPR cut of 25 basis points to 1.75%.
BNM stressed, among others, that the pace of economic recovery remains subject to downside risks emanating from both domestic and external factors.
The central bank is expected to announce the country’s 2Q20 GDP on Aug 12.
TA’s forecast for 2Q20 of this year is -13.2% year-on-year, reflecting the “significant impact of the economic disruptions following measures to contain the pandemic.”
The negative outlook may suggest that there was flexibility for interest rates to move lower, TA added.
“Since the US’ interest rate has been maintained at the low 0.0% to 0.25% level, BNM has ample room to go for another 25bps cut, if needed,” TA said, adding that the low inflation environment also made it conducive for OPR cuts.
The low inflation environment would also be conducive for OPR cuts, TA added. “An interest rate cut is possible in September’s MPC (monetary policy committee) meeting – closer to the end of the loans’ moratorium period.” – July 23, 2020
