Malaysia: OPR likely cut by 25 bps at March meeting

• Feb 11, 2021

KUALA LUMPUR: Bank Islam Malaysia Bhd expects Bank Negara to cut its overnight policy rate (OPR) by 25 basis points (bps) at the upcoming monetary policy meeting scheduled for March 4.

Chief economist Dr Mohd Afzanizam Abdul Rashid said the projection was due to the visibility of economic uncertainties following the reintroduction of the movement control order (MCO 2.0).

He said the mobility restrictions would create a serious impact on the economy if it is further extended and the period remains unpredictable.

“Therefore, Bank Negara has to come in through an OPR cut. Whatever it is, it all depends on the period of the MCO, ” he told Bernama.

Afzanizam said the projection has taken into account the Covid-19 vaccine – a variable that is still uncertain to take place.

He said the risk of vaccine rejection by the public could also hamper the journey towards recovery and provide uncertainties to the economic growth.

The OPR currently stands at a record low of 1.75%. Bank Negara reduced a cumulative 125 bps in the key interest between January and July 2020.

The central bank kept the OPR unchanged during its first meeting for this year on Jan 20, as it sees continued recovery in the global economy.

Afzanizam said a reduction in the OPR would help lower the borrowing cost and increase spending in the ecosystem, especially among companies for, among others, capital expenditure, expansion and upgrading.

Nevertheless, the move would definitely hurt the banking industry as it could reduce its net interest margins.

He expressed confidence that the OPR cut would only be an one-off circumstance for this year and Bank Negara would not reduce it further near zero. — Bernama

Source: https://www.thestar.com.my/business/business-news/2021/02/11/opr-likely-cut-by-25-bps-at-march-meeting