Bank Negara Malaysia is expected to cut the overnight policy rate (OPR) by 50 basis points (bps) to 2.0 per cent tomorrow, Standard Chartered Bank said.
The Asian-centric British bank said thereafter, the central bank might continue to ease a further 25bps in July.
This would take the policy rate to 1.75 per cent, lower than the 2.0 per cent reached
during the 2008-09 global financial crisis, Standard Chartered said in a report today..
“Even though the March monetary policy statement was balanced rather than outright dovish, we believe the economic situation has worsened meaningfully. Since the March 3 decision, Malaysia introduced movement restriction measures on March 18 (expected to last until May 12),” the bank said.
The necessary measures were set to exact a short-term economic cost, it added.
Standard Chartered said given that Bank Negara had already cut 50bps since the start of the year, a 50bps cut in May would be appropriate to balance between the need to extend monetary policy support and stability in monetary policy decisions.
“Moreover, growth projections remain highly uncertain. While fiscal pledges are significant (17 per cent of gross domestic product), indirect support, such as loan moratoriums to individuals and businesses from banking institutions, account for the bulk of support.
“In addition, Malaysia has relatively high household leverage, which should benefit from rate cuts. For example, we estimate that a 50bps cut to the mortgage rate may help households save around 0.4 per cent of GDP per annum,” the bank added.