OPR expected to be reduced this week
PETALING JAYA: The Monetary Policy Committee (MPC) expects Bank Negara Malaysia (BNM) is predicted to reduce the Overnight Policy Rate (OPR) from 3 percent to 2.75 percent during its meeting this Thursday.
According to Kosmo, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the estimation is made based on the reciprocal tariffs imposed by the United States (US) recently.
'When the OPR is reduced, it will provide an economic boost, particularly to domestic demand such as consumption and investment.
'The Malaysian economy is very open in terms of international trade and foreign portfolio investment (FPI) as well as foreign direct investment (FDI).
'Therefore, this tariff situation will have a negative impact, especially on the country's export sector to the US, which is one of Malaysia's main trading partners,' he told the Malay daily when contacted, today.
Following the latest US tariff announcement, Bank Muamalat has also lowered its forecast for Malaysia's gross domestic product growth rate from 4.7 per cent to 4.1 per cent this year.
The Bank of Thailand is among the central banks that have recently cut their key interest rate, from 2 percent to 1.75 percent.
The reduction is seen as an initial step to address the downside risks to economic growth amid the tariff shock, a decline in tourist arrivals, and tight financial conditions.
Meantime, Afzanizam also expects the ringgit's position to continue strengthening against the US dollar, due to declining confidence in the currency following reciprocal tariffs that will negatively impact the US economy.
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