Malaysia’s central bank cut on Wednesday its interest rate by 25 basis points, its first reduction in five years, as a ‘pre-emptive measure’ to sustain growth amid moderate inflation.
Bank Negara Malaysia set its benchmark overnight policy rate (OPR) to 2.75 per cent, down from 3.0 per cent.
‘The reduction in the OPR is, therefore, a pre-emptive measure aimed at preserving Malaysia’s steady growth path amid moderate inflation prospects,’ the central bank said in a statement.
‘This outlook is weighed down by uncertainties surrounding tariff developments, as well as geopolitical tensions,’ it said, adding that such uncertainties could lead to ‘greater volatility in the global financial markets and commodity prices’.
The ceiling and floor rates of the OPR corridor were correspondingly reduced to 3.0 per cent and 2.5 per cent respectively, it added.
The lowered rate came a day after US president Donald Trump increased threatened tariffs on Malaysia from 24 per cent to 25 per cent.
Malaysia’s prime minister Anwar Ibrahim cautioned in May that the country was unlikely to achieve its economic growth outlook of 4.5 per cent to 5.5 per cent.
Anwar slammed earlier on Wednesday trade tariffs, as regional foreign ministers gathered in Kuala Lumpur for a three-day meet, which also includes talks with the United States, China and Russia.
Trump’s latest tariff moves will be high on the agenda at the meeting of top diplomats of the Association of Southeast Asian Nations in the Malaysian capital, ending on Friday.
Malaysia is this year’s rotating chair of the 10-member ASEAN.
The nation’s trade minister Zafrul Aziz said at a press conference that ASEAN countries would continue bilateral negotiations with Washington ahead of the August 1 tariff deadline.
Zafrul said they remained ‘optimistic’ that a deal could still be reached.
