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Malaysia Cuts Interest Rates Again As COVID-19 Hurts Economic Growth

bankofnegaramalaysia nov08 03mar20 lt

Malaysia's central bank slashed its interest rate by 25 basis points for a second policy session in a row, as it expects growth to be hurt by the COVID-19 outbreak.

The Bank Negara Malaysia cut the overnight policy rate to 2.50 percent from 2.75 percent, on Tuesday. The decision was in line with economists' expectations.

"The reduction in the OPR is intended to provide a more accommodative monetary environment to support the projected improvement in economic growth amid price stability," the bank said in a statement.

In January, the bank had unexpectedly cut rate, which was the first reduction since May 2019.

The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.75 percent and 2.25 percent, respectively, the central bank said.

"Looking ahead, growth, particularly in the first quarter, will be affected by the COVID-19 outbreak primarily in the tourism-related and manufacturing sectors," the BNM said.

The Malaysian economy grew 4.3 percent in 2019.

"Although domestic growth is expected to gradually improve in the second half of the year, there are key downside risks, mainly stemming from the evolving nature and prolonged impact of the COVID-19 outbreak, and continued weakness in commodity-related sectors," the bank added.

Headline inflation is expected to average higher but remain modest this year, while underlying inflation is likely to be more moderate, amid limited demand pressures despite the continued expansion in economic activity, the bank added.

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