Bank Negara cuts OPR by 75 basis points
Star. Jan 21 2009
KUALA LUMPUR: Bank Negara has reduced the overnight policy rate (OPR) by 75 basis points to 2.5% and reduced the statutory reserve requirement (SRR) from 3.5% to 2%, effective from Feb 1.
It said on Wednesday the ceiling and floor rates of the corridor for the OPR were correspondingly reduced to 2.75% and 2.25% respectively.
?With the heightened downside risks to growth, the magnitude of the reductions in the OPR and the SRR are aimed to be pre-emptive in providing a more supportive monetary environment for the domestic economy,? it said in a statement released after the Monetary Policy Committee (MPC) meeting.
Bank Negara said the international economic and financial conditions had deteriorated much more significantly in the recent period.
It said the contraction in global demand and trade, combined with the reduction in global commodity prices, had affected the export earnings of many of the regional economies, including Malaysia.
?These contractionary factors have been exacerbated by the protracted turmoil in the international financial markets,? it said.
The central said the urgent implementation of policy measures will be key towards ensuring the Malaysian economy would continue to experience positive growth in 2009.
On inflation, it said the moderating growth and the significantly lower commodity prices had impacted the inflation rate which had continued to decelerate to 4.4% in December 2008.
?This deceleration is expected to continue with the weaker demand conditions and lower imported inflation,? it said.
Bank Negara said given that the Malaysian banking system remained fundamentally sound, the central bank would continue to ensure access to credit to all sectors of the economy, and that the reduction in interest rates would be reflected in lower borrowing costs.