BNM, in the final Monetary Policy Committee (MPC) meeting for this year, decided to maintain its overnight policy rate (OPR) at 1.75%. It is the second time in a row BNM left the policy rate unchanged where 9 economists out of 17 predicted no rate cut. This brings the cumulative rate cut to a total of 125bps.

Despite maintaining the OPR, BNM is being more cautious this time compared to September, The targeted CMCO could affect the momentum of economic recovery in the fourth quarter. BNM emphasized that the balance of risk is still tilted to the downside, citing the risk of a further resurgence of Covid-19 infections which could lead to weaker business, employment and income conditions.

However, the impact could be transitory. The massive fiscal stimulus worth RM305 billion or 21% of GDP should support the domestic economy. For 2020, we reiterate our growth outlook at -3.6% to -5.6% which is close to BNM’s growth target of -3.5% to -5.5%. But the growth outlook for 2021 remains positive. Better global GDP and trade outlook, added with domestic stimulus measures, should see the domestic economy grow around 5.5% to 6.0%.

• In the final Monetary Policy Committee (MPC) meeting for this year, BNM decided to maintain its overnight policy rate (OPR) at 1.75%. It is the second time in a row BNM left the policy rate unchanged where 9 economists out of 17 predicted no rate cut. This brings the cumulative rate cut to a total of 125bps.

• Despite maintaining the OPR, BNM is more cautious this time compared to September. The targeted CMCO could affect the momentum of economic recovery in the fourth quarter. BNM emphasized that the balance of risk is still tilted to the downside, citing the risk of a further resurgence of Covid-19 infections which could lead to weaker business, employment and income conditions.

• However, the impact could be transitory. The massive fiscal stimulus worth RM305 billion or 21% of GDP should support the domestic economy. For 2020, we reiterate our growth outlook at -3.6% to -5.6% which is close to BNM’s growth target of -3.5% to -5.5%. But the growth outlook for 2021 remains positive. Better global GDP and trade outlook added with domestic stimulus measures should see the domestic economy grow around 5.5% to 6.0%.

Source: AmInvest Research - 4 Nov 2020