StanChart expects no OPR cut by BNM this month

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KUALA LUMPUR (Sept 8): Standard Chartered (StanChart) expects Bank Negara Malaysia (BNM) to maintain the overnight policy rate (OPR) at 1.75% in the next monetary policy meeting as the central bank is likely to take a wait-and-see stance to take stock and assess Malaysia’s recovery in the second half of 2020 (2H20).

In a note today, it said the central bank is expected to pause and take stock as global economies reopen, with higher-frequency data showing a clear pickup in activity, while economic data projections remain uncertain due to lockdown disruption.

BNM has already delivered cumulative cuts of 125 basis point (bps) in the last four meetings to a historical low and any further cuts may only result in a limited marginal impact and reduce future policy space, given that some of the pandemic restrictions are still in place.

“We believe the central bank has room to adopt a wait-and-see stance. If a recurrence of infections threatens the recent recovery in activity (global or local) or if the implementation of fiscal measures is weak, BNM could cut policy rates further,” wrote StanChart chief economist for Asean and South Asia Edward Lee.

BNM’s Monetary Policy Committee (MPC) will be meeting on Thursday (Sept 10), which will be its second last meeting in 2020 before the final one in November.

The first two meetings of the year saw a 25bps cut each, followed by a 50bps cut in May and another 25bps cut in July, with the bank citing the severe impact of Covid-19 on the global economy.

In its July statement, BNM noted that global economic conditions remained weak with global growth projected to be negative for the year. 

During its second-quarter (2Q) gross domestic product (GDP) briefing last month, the central bank announced a revision of its economic growth forecast for Malaysia to between -3.5% and -5.5% to reflect changes in world growth forecasts and the unprecedented length of the movement control order (MCO).

Surin Murugiah