Malaysia central bank interest rate decision expected

Malaysia’s monetary policy committee meets today in Kuala Lumpur. The country’s central bank is expected to cut interest rates to

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Photo: REUTERS/Lim Huey Teng/File Photo

Malaysia’s monetary policy committee meets today in Kuala Lumpur.

The country’s central bank is expected to cut interest rates to a historic low as it seeks to protect Southeast Asia’s third-largest economy from the fallout of the COVID-19 pandemic. The Bank Negara Malaysia (BNM) is anticipated to slash its overnight policy rate from 2.00% to 1.75%.

The move comes as the country faces sobering economic data indicative of a larger economic crisis. The economy grew only 0.7% in the first quarter while exports fell over 25% in May, the country’s most precipitous drop in over a decade. Moreover, despite over $68 billion in stimulus packages thus far, Malaysia has recorded three straight months of reduced consumption—the consumer price index down 2.9% in May from a year prior.

While Malaysia’s economy is showing early signs of recovery, especially in manufacturing and the stock market, an anticipated decline in exports to the US as American COVID-19 cases spike as well as a potential renewal of US-China trade tensions continue to pose a threat to the recovery. Expect these considerations to weigh heavily on BNM policymakers as they likely err on the side of caution and agree to a rate cut.

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