Report: Bank Negara expected to reduce OPR to record low of 1.5%

PETALING JAYA: Bank Negara Malaysia (BNM) will reduce its overnight policy rate (OPR) by a further 25 basis points (bps), say seven out of 13 economists polled by Reuters.

An announcement is expected following the central bank’s policy meeting on Thursday.

Such a move will also see the OPR reduced to a record low of 1.5%, with BNM having already delivered 125 bps of rate cuts this year. The last cut of 25 bps was announced on July 7.

The remaining six economists, however, believe that the current 1.75%, also a historic low, will be maintained.

According to the report, policymakers might have to balance the need to support a virus-hit economy with a pick-up in exports.

The country’s reliance on exports has seen the economy hit badly in the second quarter (Q2) of the year due to the fallout from the coronavirus pandemic.

However, exports have started to rebound in Q3.

“Even though a pick-up in exports should support manufacturing, the rest of the economy will continue to be under downward pressure,” Prakash Sakpal, Asia senior economist for ING told Reuters.

“Mining, construction and services were the worst-affected in Q2 and will remain so over the rest of the year,” he was quoted as saying.

He added that the increase in unemployment numbers was also hurting consumer spending.

Meanwhile, Malaysia’s exports rose for the second straight month in July. This was an increase of 3.1% from a year earlier, thanks to higher shipments of manufactured goods and agricultural commodities.

However, with unemployment rising to 5.1% in Q2 and consumer prices continuing to fall in July, the signs are that the Malaysian economy is still struggling.