Bank Negara cut its benchmark interest rate by a record 75 basis points yesterday and also reduced the statutory reserve requirement (SRR) in a move to lower borrowing costs.
The central bank said it had reduced the overnight policy rate (OPR) from 3.25% to 2.5% and reduced the SRR from 3.5% to 2% effective Feb 1.
“With the heightened downside risks to growth, the magnitude of the reductions in the OPR and the SRR are aimed to be pre-emptive in providing a more supportive monetary environment for the domestic economy,” it said in a statement. Other points in the statement included:
> Urgent implementation of policy measures crucial to ensure positive growth.
> Inflation continued to decelerate to 4.4% in December. Deceleration expected to continue with weaker demand and lower imported inflation.
> The Malaysian banking system remains fundamentally sound.
> Focus is to ensure access to credit to all sectors of the economy.
Meanwhile, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said the proposed second stimulus package must focus on the manufacturing and construction sectors to avert more retrenchments.
ACCCIM president Tan Sri William Cheng said the stimulus plan must be implemented quickly as the two sectors would be the most affected by the global financial crisis during the first-half of this year.
He also called for a reduction in prices of gas and electricity and a reduction in employers’ contribution to the Employees Provident Fund from 12% to 9%.