Bank Negara Malaysia cuts rate as global outlook darkens

Bank Negara Malaysia has launched a fresh round of monetary easing, as policy-makers expect the weaker external environment to impact the Malaysian economy.

The monetary policy committee chose to lower the policy rate 50 basis points to 2%, a level last seen in 2010. In early March, the MPC cut the rate 25 basis points, as the Covid-19 pandemic worsened and the economic impact spread globally.

In a statement today (May 5), the MPC noted that global conditions had “weakened significantly” and Malaysia’s economy was likely to be hit by the effects of global containment measures, border closures and the “consequent weak external demand environment”. Local restrictions on people’s movement are also taking a toll, policy-makers added.

Inflation is likely to be “muted” in 2020 and the central bank expects headline inflation to be negative on average over the year.

The MPC said it expects the monetary easing measures to complement other actions, including fiscal policy. “Together, these measures will cushion the economic impact on businesses and households and support the improvement in economic activity,” it said.