KUALA LUMPUR, July 10 (Xinhua) -- Economists see Malaysian central bank's first rate cut in five years as a pre-emptive move amid the uncertainties over U.S. tariffs.
In a pre-emptive move to support growth amid rising downside risks, Bank Negara Malaysia (BNM) cut the OPR by 25 basis points to 2.75 percent on Wednesday, its first rate cut since July 2020.
RHB Investment Bank said in a note on Wednesday that the move is seen as a measure to support growth and safeguard the domestic economy against potential spillover effects from heightened external headwinds and prolonged trade tensions.
Hong Leong Investment Bank also said in a note on Thursday that downside risks for Malaysia's economy have increased due to a series of escalating threats, including potential artificial intelligence (AI) chip export ban, the possibility of a 25 percent tariff rate, additional tariffs on semiconductors, and geopolitical alignment risks.
The research house opined that these factors likely contributed to the central bank's pre-emptive rate cut decision.
"Looking ahead, while Bank Negara Malaysia is not on a pre-set policy path, we expect the OPR to remain at 2.75 percent for the remainder of the year unless there is a notable deterioration in Malaysia's competitiveness or a significant weakening in economic activity," it added.
UOB Global Economics and Market Research said in a note on Wednesday that BNM's latest monetary policy statement retained a cautious tone, underscoring downside risks to growth due to persistent uncertainties clouding the outlook.
"The eventual tariff landing remains fluid, reflecting ongoing uncertainties in the negotiation process. Hence, we maintain our view for another 25 basis points cut in the OPR to 2.50 percent by end-4Q25," said the research house. ■
