Malaysia central bank lowers key rate to 2.75% on weaker growth outlook
Bank Negara Malaysia lowered its overnight policy rate (OPR) by 25 basis points to 2.75 per cent from 3.00 per cent, where it had been since May 2023, as had been expected by 17 of 31 economists surveyed in a Reuters poll.
The ceiling and floor rates of the OPR corridor are correspondingly reduced to 3 per cent and 2.5 per cent respectively, the central bank said in a statement.
The rate decision came a day after U.S. President Donald Trump announced a 25 per cent tariff on Malaysian exports to the United States.
BNM said the global growth outlook was weighed down by uncertainties surrounding tariffs, as well as geopolitical tensions, which could lead to greater volatility in global financial markets and commodity prices.
While the Malaysian economy was on a strong footing, the central bank said external uncertainties could affect Malaysia's growth prospects.
"The reduction in the OPR is... a pre-emptive measure aimed at preserving Malaysia's steady growth path amid moderate inflation prospects," the central bank said.
Economists had expected at least one 25-basis-point cut this year, which would hold until the end of 2026, though there was no consensus on where the rate would be then. Estimates for the end of next year ranged from 2.25 per cent to 3.00 per cent.
Malaysia has reported a string of soft economic data in recent months with growth slowing to 4.4 per cent in the first quarter, while exports unexpectedly fell in May.
Inflation has also remained relatively subdued, with consumer prices rising 1.2 per cent in June, a four-year low.
Prime Minister Anwar Ibrahim said in May that Malaysia was unlikely to meet its growth outlook of between 4.5 per cent and 5.5 per cent this year, while BNM has said it would have to lower its growth forecast range due to uncertainties arising from U.S. tariff policies.
The central bank also lowered banks' statutory reserve requirement (SRR) ratio by 100 basis points to 1.00 per cent in May - the first SRR reduction since March 2020 at the start of the COVID-19 pandemic - reinforcing a dovish policy outlook.
Malaysia's trade ministry said this week it will continue talking to its U.S. counterparts "in good faith" to address outstanding issues, and clarify the scope and impact of the revised U.S. tariffs.
Headline and core inflation averaged 1.4 per cent and 1.9 per cent in the first five months of the year respectively, BNM said, adding that consumer prices are expected to remain moderate in 2025.
The central bank projects headline inflation to range between 2 per cent to 3.5 per cent in 2025, and core inflation at 1.5 per cent to 2.5 per cent. Both headline and core inflation came in at 1.8 per cent in 2024.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
8 minutes ago
- Business Times
StanChart sets US$1.3 billion buyback as first-half profit outstrips forecasts
[HONG KONG/LONDON] Standard Chartered (StanChart) reported on Thursday (Jul 31) a higher-than-expected 26 per cent jump in first-half pretax profit, as a strong performance in the wealth, markets and global banking businesses boosted revenue at the lender. Emerging markets-focused StanChart also announced a further US$1.3 billion share buyback that it said would start imminently. The London-headquartered lender said that the reported pretax profit for the first six months of this year hit US$4.38 billion. That compared with US$3.49 billion a year earlier and the US$3.83 billion average of 15 analyst estimates compiled by the bank. Despite the strong results, StanChart kept its key performance targets largely unchanged, saying the global economy could suffer from the broader fallout of US President Donald Trump's trade wars. The bank, which earns most of its revenue in Asia and Africa, slightly raised its guidance for income this year, saying it now expected growth to be at the bottom of a 5 to 7 per cent range rather than below it. StanChart's trading business, its second-biggest revenue driver, registered a 28 per cent rise in operating income to US$2.4 billion, propelled by buoyant client trading amid rising market volatility following the US-initiated trade talks. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Wealth management income shot up by 24 per cent as efforts to boost fee revenue paid off with inflows and the number of new accounts rising due to demand for wealth advice amid the market volatility. The bank has said that it will target US$200 billion in new assets and double-digit growth in income from its wealth business over the next five years, as part of a wider strategy to shift to higher fee-earning businesses. It said 135,000 new affluent clients joined the bank in the first half of 2025, bringing in US$28 billion of net new money. The lender also appeared to dodge the multi-billion dollar China-related write-downs which blighted rival HSBC's results announced on Wednesday, with StanChart reporting an impairment charge for the first half of US$336 million, mainly from its wealth and retail banking unit. The bank said that its exposure to Hong Kong's troubled commercial real estate sector was US$2.1 billion, less than 0.5 per cent of its total book, with provisions rising US$34 million in the second quarter of the year to US$116 million. The lender, however, warned that cash constraints on borrowers could lead to more impairments. REUTERS
Business Times
8 minutes ago
- Business Times
Trump set to attend Asean summit in October, Malaysian PM Anwar Ibrahim says
[KUALA LUMPUR] The US tariff rate on Malaysian goods will be announced on Friday (Aug 1), Malaysia's prime minister said on Thursday after speaking to US President Donald Trump. Anwar Ibrahim was speaking in parliament to table the country's new five-year economic plan. Anwar also said Trump confirmed that he would attend an Asean summit in October. REUTERS
Business Times
8 minutes ago
- Business Times
Consumer companies confront tariff pricing dilemma
FROM toys to sneakers and diapers, consumer goods are the focus of a range of company strategies to blunt the impact of US tariffs - depending on the size of their customers' wallets. Adidas said it could launch new products at higher prices in the US, Levi Strauss will cut back on promotions, and packaging giant Proctor & Gamble is introducing price hikes from next week. Some of the world's biggest companies have warned for months, since US Donald Trump's April 2 'Liberation Day' tariff announcements, that they would be squeezed by hefty duties. Now, they are outlining how they are changing their businesses to try to cushion the blow of rising costs, uncertainty over US trade policy, and waning consumer confidence. Their different approaches reflect a growing divide about how much they calculate they can pass on to their customers without hurting sales. Shoppers, particularly those already grappling with tighter budgets amid economic and geopolitical uncertainty, may baulk at paying more for everyday items, while middle- and higher-income consumers may be willing to splash more cash on higher-priced discretionary items. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Tariffs will act as a regressive tax on household consumption, weighing proportionately more on low- and middle-income household spending than upper-income households,' Morgan Stanley analysts said in a note. French cosmetics group L'Oreal has not tweaked its prices to adjust for tariffs, but CEO Nicolas Hieronimus is scanning his vast portfolio of goods from Valentino perfume to La Roche-Posay face cream to check what increases customers may tolerate. 'We're still assessing all the options, and we're also waiting for the dust to settle,' Hieronimus told Reuters on Tuesday. 'There is some pricing power on fragrances, but we have to also consider the elasticity of the demand, so we'll see how we manage it.' Reuters' global tariff tracker shows at least 92 out of nearly 300 companies monitored by the tracker have announced price hikes in response to the trade war, with about a third of them from the consumer sectors. Some luxury firms may have a little more power than others. Birkin bag maker Hermes raised prices by 7 per cent globally, with an additional 5 per cent hike specifically in the US, where the company flagged it would fully pass on the effects of tariffs to clients. Porsche and Aston Martin on Wednesday disclosed small price increases in the US, but the news came as they issued profit warnings, underscoring the fragility of the market. 'This is not a storm that will pass,' Porsche CEO Oliver Blume said. As low as possible Toymaker Mattel Inc announced in May it would raise prices on some US products. Last week, CFO Paul Ruh said the company has now implemented those price increases and does not expect further hikes this year. 'Our goal is to keep prices as low as possible for consumers,' he said. Adidas, whose Samba sneaker line starts at US$100 on its US website, will review its pricing and decide which products it could hike prices on in the US once tariffs are finalised, CEO Bjorn Gulden said on Wednesday. He declined to say how much prices might increase. 'New product that no one has seen is easier to increase than products that already exist,' he told analysts on a call. But he warned of the risks of going too far with price increases given the uncertainty over trade and a consumer he described as 'a little bit depressed in many areas'. Adidas shares fell more than 11 per cent to February 2024 lows on Wednesday as investors fretted about the strategy at a time of fragile consumer confidence and sensitivity to prices. 'I think it is very, very important that you don't run away from the lower price points and believe you can just raise prices and do less volume,' he told analysts. REUTERS
