OPR Expected To Remain At Current Level Until Year-End

KUALA LUMPUR, July 7 (Bernama) -- MIDF Research expects the overnight policy rate (OPR) to remain at the current level until year-end, following Bank Negara Malaysia’s (BNM) decision to lower the rate by another 25 basis points (bps) to 1.75 per cent Tuesday. The move by BNM was widely anticipated by the market and also in line its expectation, the research house said. "With the rate cut today, we do not foresee any need for additional monetary easing. “Despite the uncertainty and the downside risk to growth, the current level of policy rate is deemed accommodative for the recovery in economic activities to pick up further in the coming months. “Measures to support employment will be positive for consumer spending, and the growing confidence in the economy, and businesses reopening and adjusting to the new normal will provide additional boost to the country’s economic recovery,” said MIDF Research in a note Tuesday. The external demand could remain a drag to growth, depending on the pace of recovery and stabilisation in foreign demand, it added. Earlier today, BNM reduced the OPR by another 25 bps to 1.75 per cent, a record low since the floor was set in 2004. In a statement, the central bank said the Monetary Policy Committee decided to have the ceiling and floor rates of the corridor of the OPR correspondingly reduced to 2.00 per cent and 1.50 per cent, respectively. Meanwhile, MIDF Research expects the Malaysian economy in 2020 to contract by 2.1 per cent, impacted by the COVID-19 pandemic. This is in view of the weaker demand condition as a result of the Movement Control Order (MCO) imposed by the government from mid-March 2020. “The abrupt decline in the domestic economic activities as businesses halted operations and workers adjusting to working from home, will translate into weaker growth numbers especially during the first few months after the MCO. “On the outlook for exports, we forecast that overseas demand will also fall as economic activities in other parts of the world declined due to the spread of COVID-19 cases,” it said. -- BERNAMA