Will Bank Negara Malaysia cut OPR by another 25 bps?

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AmBank Forecasts Further 25 Basis Points OPR Cut

AmBank (M) Bhd anticipates a further reduction of 25 basis points (bps) in Malaysia's Overnight Policy Rate (OPR), bringing it closer to a deflationary scenario. This projection is based on the expectation of persistently weak inflation throughout 2020. The current OPR stands at 2.50 per cent, following a previous 25 bps cut on March 3.
Inflationary Outlook and OPR Expectations

AmBank's analysis suggests that inflation is likely to average around +0.3 per cent for the year, with a notable possibility of dipping into deflation, potentially reaching -1.5 per cent. This forecast stems from a lack of significant cost-push and demand-pull inflationary pressures, exacerbated by weak commodity prices and excess economic capacity. The projected weakness in inflation directly underpins the expectation for further monetary easing by Bank Negara Malaysia.
Recent Inflationary Trends

The most recent inflation data shows a marked slowdown, with headline inflation falling by 0.2 per cent year-on-year (YoY) in March. This represents a significant decrease from the 1.3 per cent YoY increase recorded in February. While this March figure was slightly higher than AmBank's initial expectation of -0.3 per cent and the market consensus of -0.1 per cent, it still indicates a deflationary trend. This decline in March inflation marks the first instance of deflation since February 2019.
Monetary Policy Meeting Schedule

The potential for an additional OPR cut will be a key consideration at Bank Negara Malaysia's upcoming Monetary Policy Committee meeting. This meeting is scheduled to take place on May 5. The committee will assess the prevailing economic conditions, including the latest inflation figures and broader economic outlook, to determine the appropriate monetary policy stance. The previous OPR reduction on March 3 was the second cut in less than three months, highlighting a proactive approach to managing economic pressures.

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Will Bank Negara Malaysia cut OPR by another 25 bps?

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