Published on 20 Jan 2021.
Bank Negara Malaysia (BNM) has kept the overnight policy rate (OPR) unchanged at 1.75%. This is consistent with RAM Ratings’ view that the four rate cuts in 2020 - amounting to 125 basis points – remain sufficient to support economic activity this year.
We expect growth to stay tepid in 1Q 2021 amid the resurgence of COVID-19 and the reinstatement of the Movement Control Order (MCO) throughout most of Malaysia. While the latest PERMAI stimulus package may partly mitigate the impact on near-term growth, further extensions of MCO over the next few months, coupled with persistently weak global outlook would heighten the probability of future rate cuts.
For now, we have maintained our OPR forecast at 1.75% for the year, with a downside bias given growth uncertainties and muted inflationary pressures. We believe BNM will instead employ more targeted monetary easing measures to sustain economic recovery.
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