Standard Chartered Bank believes Bank Negara Malaysia (BNM) would once again slash the Overnight Policy Rate (OPR) by 25 basis points (bps) at this year’s last Monetary Policy Committee (MPC) meeting on 3 November, reported Bernama.
StanChart noted that the enforcement of the latest conditional movement control order (CMCO) may require renewed focus on growth support, given the sharp resurgence of COVID-19 infections in Malaysia.
The lower bound of the government’s gross domestic product growth forecast for this year – at -3.5% to -5.5% – may also be threatened by the latest extension of the CMCO to 9 November, it said.
“This may provide an anchor for BNM’s decision on 3 November,” explained StanChart in a note.
While it may not boost investment activity, a lower interest rate may help reduce financing cost as well as provide more cash buffer for households.
It pointed to concerns over the stability of foreign exchange as another risk to its OPR forecast.
Considering the upcoming US election, StanChart said inflation and growth should be the chief considerations for monetary policy.
Overall, StanChart describes the decision to be a close one, saying it would depend on whether BNM wants to be pre-emptive.
“We think the recent sharp increase in infection rates onshore may require longer-than-expected restrictions to flatten the curve,” it said as quoted by Bernama.
“With the next BNM policy meeting likely to be only in January 2021, we expect the central bank to provide additional monetary support now rather than later.”
Currently, the OPR stands at 1.75% following the central bank’s decision to cut the key interest rate for four times in a row this year, kicking off with two 25 bps cuts during the January and March meetings. A 50 bps reduction was made in May and a 25 bps cut was again made in July.
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