• BNM holds OPR at 1.75%
   
• Downside risks remain amid uncertainties surrounding the COVID-19 pandemic

• Banks may continue to use MGS, MGII to meet SRR compliance until end-2022

• OPR to stay on hold but could ease further should risks to the economic recovery fester

Bank Negara Malaysia’s Monetary Policy Committee (MPC) kept the Overnight Policy Rate (OPR) unchanged at 1.75% during its first MPC meeting of the year. The decision to hold OPR follows a cumulative -125bps of rate cuts over four straight meetings last year (22 Jan: -25bps, 3 Mar: - 25bps, 5 May: -50bps, and 7 Jul: -25bps). At the same time, BNM also kept the Statutory Reserve Requirement (SRR) unchanged at 2.00%. The previous SRR cut was by -100bps on 19 March 2020.

As BNM has lowered its OPR by a total of 125bps last year, from 3.0% to 1.75%, the MPC, in its latest Monetary Policy Statement view the current level as appropriate and accommodative to provide further support to domestic demand. The bank remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery.

Source: BIMB Securities Research - 20 Jan 2021