KUALA LUMPUR: Standard Chartered Bank expects Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) by 50 basis points (bps) to two per cent on May 5 and to continue to ease by a further 25 bps in July.
In a research note today, it said this would take the policy rate to 1.75 per cent, lower than the two per cent OPR during the 2008-2009 global financial crisis.
“Even though the March monetary policy statement was balanced rather than outright dovish, we believe the economic situation has worsened since Malaysia introduced the movement restriction measures on March 18,” it said.
The bank opined that as BNM had already cut the OPR by 50bps since the start of the year, a further 50bps cut in May would be appropriate, balancing 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, indirect support such as loan moratoriums to individuals and businesses from banking institutions account for the bulk of support,” it said.
Additionally, the bank said that Malaysia has a relatively high household leverage, which should benefit from the rate cuts.
“We estimate that a 50-bps cut to the mortgage rate may help households save around 0.4 per cent of the gross domestic product per annum,” it said. – Bernama
