KUALA LUMPUR — Malaysia’s central bank on Wednesday cut its benchmark interest rate by 25 basis point to 2.75%, surprising most economists, who had predicted no change.
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In a statement, Bank Negara Malaysia announced that the ceiling and floor overnight interest rates had been reduced to 3.00% and 2.50%, respectively.
The move was the first rate cut since last May, when the bank also loosened by a quarter point. It is also the second interest rate reduction since Mahathir Mohamad returned as prime minister in a May 2018 election.
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“The adjustment to the [overnight policy rate] is a preemptive measure to secure [an] improving growth trajectory amid price stability,” said the central bank’s Monetary Policy Committee, adding that Malaysia’s economic growth this year is expected to gradually improve from 2019, with continued support from household spending and better export performance.
Downside risks to growth include uncertainty from trade talks, geopolitical risks, weaker-than-expected growth from major trade partners, heightened volatility in financial markets, and domestic factors such as weakness in commodity-related sectors and delays in implementation of government projects.