Bank Negara Malaysia surprises with interest rate cut

KUALA LUMPUR - Bank Negara Malaysia (BNM) has unexpectedly cut the overnight policy rate for the first time in seven years to 3.00% from 3.25% in a move which ANZ Bank describes as pre-emptive.

“BNM is leveraging on the window of opportunity provided by the paring back of Fed hike expectations and an easing in inflation trajectory to counteract expected weakness in external demand,” ANZ says in a research note.
“Growth and credit conditions have not deteriorated significantly at this juncture (enough) to warrant a cut. In fact, the 2016 growth forecast was maintained, with BNM shading the inflation forecast lower by 0.5ppt to 2%-3%.”
ANZ says that with BNM still positive on domestic demand, the overhang risk of a further policy rate cut could be triggered by a significant slowdown in domestic demand, particularly private consumption.
BNM joins regional Asian central banks such as Indonesia and Taiwan with today’s 25bps cut.  www.live.anz.com (ATI).