Bank Negara Malaysia has decided to lower the Overnight Policy Rate to 2.75% from 3% previously, following the meeting of its Monetary Policy Committee meeting.
In a statement, BNM said the adjustment to the OPR is a pre-emptive measure to secure the improving growth trajectory amid price stability.
“At this current level of the OPR, the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability,” it said.
The central bank noted that for the Malaysian economy, latest indicators and supply disruptions in commodity-related sectors point to the moderate expansion of economic activity in the fourth quarter, however, downside risks still remain.
“These include uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects,” it said.
Headline inflation averaged at 0.7% in 2019. In 2020, headline inflation is expected to average higher but remain modest.
“The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings,” said BNM in its statement.
Underlying inflation is expected to remain broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures.
For 2020, growth is expected to gradually improve, with continued support from household spending and better export performance.
At the same time, overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors.