BNM may cut OPR at Nov 3 meeting

Kuala Lumpur: Bank Negara Malaysia is expected to cut its Overnight Policy Rate (OPR) by 25 basis points (bps) at its Monetary Policy Committee (MPC) meeting on November 3, said Standard Chartered Bank (StanChart).

The meeting will be MPC's last for the year.

StanChart, in a report, recently, said the sharp resurgence of Covid-19 infections and the Conditional Movement Control Order (CMCO) extension might require renewed focus on growth support.

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The latest extension of the CMCO to November 9 might threaten the lower bound of the government's 2020 gross domestic product (GDP) growth forecast of -3.5 per cent to -5.5 per cent.

"We are now calling for another 25bps rate cut by Bank Negara on November 3, versus our previous call of no change," the bank said.

StanChart said further rate cuts might not boost investment activity at this time but a lower interest rate would help to lower financing costs and provide a bit more cash buffer for households.

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The bank said another risk to its OPR forecast was concerns over foreign exchange stability.

It said that given the upcoming US election, growth and inflation should be the primary considerations for monetary policy. Overall, the bank said the decision was likely to be a close one, depending on whether the central bank wanted to be pre-emptive.

"We think the recent sharp increase in infection rates onshore may require longer-than-expected restrictions to flatten the curve. "With the next Bank Negara policy meeting likely to be only in January 2021, we expect the central bank to provide additional monetary support now rather than later," it added.

The OPR currently stands at 1.75 per cent after Bank Negara slashed the key interest rate four consecutive times this year.

It kicked off with the two 25 bps reductions at the January and March meetings, followed by a 50 bps cut in May and another 25 bps cut in July.