Interest rate cut: Maybe next year
KUALA LUMPUR: Increased risks due to the uptick in Covid-19 infections and political bickering are not enough to prompt Bank Negara Malaysia to cut its key interest rate, economists said.
They said Bank Negara's decision to retain the Overnight Policy Rate (OPR) at 1.75 per cent was in line with what the broad market had expected.
The decision was influenced by a significant improvement in economic activity in the third quarter (Q3), they added.
In deciding to maintain the interest rate at its Monetary Policy Committee (MPC) meeting yesterday, Bank Negara said the cumulative 125 basis points (bps) OPR reduction this year would continue to stimulate the economy.
OANDA senior market analyst for Asia Pacific Jeffrey Halley said the decision was expected as the central bank was keen to keep its powder dry on the interest rate front, leaving some firepower if the fourth quarter (Q4) activity turned down again.
"They will also have one eye on Friday's 2021 Budget and subsequent vote. Also note that the government has little wiggle room on focal stimulus," he told the New Straits Times (NST).
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