KUALA LUMPUR, Jan. 22 (Xinhua) -- Malaysian Central Bank took market by surprise on Wednesday by cutting the interest rate to 2.75 percent from 3 percent to safeguard growth.
The central bank last cut its interest rate in May 2019.
The central bank Bank Negara Malaysia said in a statement that its Monetary Policy Committee (MPC) saw the Overnight Policy Rate (OPR) adjustment as a pre-emptive measure to secure the improving growth trajectory amid price stability.
At this current level of the OPR, the MPC considered the stance of monetary policy to be appropriate in sustaining economic growth with price stability.
The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 3 percent and 2.5 percent, respectively, according to the statement.
The bank said that Malaysia's economic growth in 2019 should be within its projection of 4.3 percent to 4.8 percent.
It also expects the growth to gradually improve in 2020, with continued support from household spending and better export performance.
"Latest indicators and supply disruptions in commodity-related sectors point to moderate expansion of economic activity in the fourth quarter," said the bank.
The central bank also anticipated overall investment activity to recover modestly, underpinned by ongoing and new projects both in the public and private sectors.
However, it warned about downside risks for growth, such as uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects.
It also said the geopolitical tensions and policy uncertainties in a number of countries could cause a resurgence of financial market volatility and weigh on the global growth outlook.
Analysts do not rule out another rate cut in the second half after the central bank's surprise decision on Wednesday.
Capital Economics said in a note Wednesday that with economic growth set to slow further over the next couple of quarters, the central bank will ease policy again this year.
"We have penciled in one further 25 basis point rate cut, probably in the second half of this year," said the global research house.
