Bank Negara cuts OPR rate again to mitigate Covid-19 impact

Bank Negara Malaysia (BNM) has cut its key interest rate on Tuesday to the lowest in 10 years, to reduce the impact of the coronavirus outbreak on the country's exports and tourism.

The central bank cut its overnight policy rate by 25 basis points to 2.5 percent, its second cut to its benchmark rate this year.

The central bank's monetary policy committee said the virus outbreak will weigh on the economy, particularly in the first quarter, and add further pressure on full-year growth as the Southeast Asian country continues to grapple with weakness in commodity-related sectors.

"The reduction in the OPR (overnight policy rate) is intended to provide a more accommodative monetary environment to support the projected improvement in economic growth amid price stability," the committee said in a statement.

This is the second cut to BNM's benchmark rate this year and comes after a week of political turmoil in which Muhyiddin Yassin took over as prime minister following the resignation of 94-year-old Dr Mahathir Mahathir.

The central bank made a surprise 25 basis point cut in January, in what it described as a "pre-emptive measure" to shore up growth prospects.

Economists in a Reuters poll were split on whether the central bank would cut its benchmark rate, with six out of 11 seeing a 25 basis point cut.

The move follows a cut by Australia's central bank earlier on Tuesday to slash its benchmark rate to a record low and ahead of plans by the Group of Seven nations to work together to soften the global economic hit of the coronavirus.

Last month, BNM reported growth of 3.6 percent for the fourth quarter, the country's weakest quarterly pace since the global financial crisis. Full-year growth for 2019 came in at 4.3 percent, at the bottom end of the central bank's forecast.

BNM Governor Nor Shamsiah Mohd Yunus had said then that there was "ample room" to adjust interest rates, as analysts see sustained pressure on global supply chains and tourism from the coronavirus outbreak.

Last week, the government unveiled an RM20 billion (US$4.76 billion) stimulus package to cushion the blow from the outbreak, providing tax breaks and cash aid to affected companies, among others.

- Reuters