Thu, Jul 14, 2016 - Page 12 News List

Malaysian central bank unexpectedly cuts interest rates


Malaysia’s central bank unexpectedly cut interest rates for the first time in seven years, joining Asian counterparts from Taiwan to Indonesia that have eased policy this year to bolster their economies as global risks mount.

Bank Negara Malaysia lowered the overnight policy rate by 25 basis points to 3 percent, it said yesterday in a statement in Kuala Lumpur.

Reza Siregar of Goldman Sachs Group Inc was the only one of 18 economists surveyed by Bloomberg News who predicted a reduction, with the rest expecting no change.

“They assess that the external risks have reverted much higher,” Julia Goh, an economist at United Overseas Bank Ltd in Kuala Lumpur, said before the decision. “Probably the domestic sources of growth will not be sufficient to cushion the downside risks from the external side.”

Just two months into the job, Bank Negara Malaysia Governor Muhammad Ibrahim is facing increased pressure to lower borrowing costs to spur an economy projected to expand at the slowest pace in seven years amid falling oil revenue and weaker exports.

The UK’s decision last month to leave the EU has clouded the global growth outlook, denting demand for Malaysian goods.

The central bank cut its inflation forecast for this year to 2 percent to 3 percent from 2.5 percent to 3.5 percent.

Consumer prices rose 2 percent in May from a year earlier.

The Malaysian currency has strengthened 7.5 percent against the US dollar this year, the best performer in Asia after Japan’s yen.

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