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Malaysia becomes latest emerging market to cut rates amid growth risks


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Malaysia becomes latest emerging market to cut rates amid growth risks

Malaysia's central bank unexpectedly cut its overnight policy rate by 25 basis points amid downside risks to economic growth, in a move it described as "a preemptive measure."

Malaysia became the latest emerging market to ease monetary policy in 2020 after Turkey and South Africa cut rates earlier in the year.

The overnight policy is now at 2.75%, as the Bank Negara Malaysia also trimmed the ceiling and floor rates of the corridor for the overnight policy rate to 3.00% and 2.50%, respectively.

The central bank expects domestic economic growth to remain within the predicted range in 2019, with growth improving in 2020 on the back of household spending and higher exports. However, uncertainty from trade talks and geopolitical risks, among other factors, could weigh on the country's growth trajectory.

Meanwhile, average headline inflation in 2020 is expected to rise from 0.7% in 2019, while underlying inflation is projected to stay largely stable.

The rate cut "is a preemptive measure to secure the improving growth trajectory amid price stability," according to the central bank.

The Malaysian ringgit was trading 0.1% higher around 3:35 a.m. ET.

ING Asia Economist Prakash Sakpal expects no more cuts by the central bank in 2020.