Malaysia unexpectedly cuts benchmark rate in ‘pre-emptive measure’

Bloomberg

Malaysia’s central bank cut its benchmark interest rate in a surprise move on Wednesday, the first in Southeast Asia to do so this year as it seeks to support its economy amid lingering global uncertainty.
Bank Negara Malaysia reduced the overnight policy rate to 2.75%, a 25 basis-point cut predicted by just two of the 26 economists surveyed by Bloomberg. The rest forecast no change.
The central bank is moving to bolster confidence in Malaysia’s economy since it began showing signs of strain from the global slowdown last year. The bank cut the statutory reserve ratio requirement in November as growth weakened in the third quarter.
The adjustment to the policy rate “is a pre-emptive measure to secure the improving growth trajectory amid price stability,” central bank said. Malaysia’s economy is showing signs of picking up after a lackluster year confronting external risks.
December’s manufacturing PMI signaled an expansion in factory output for the first time in 15 months. Industrial production grew at a five-month high of 2% in November from a year ago
While the recent signing of a U.S.-China trade deal may not impact Malaysia’s exports immediately, there are signs of improvement. Shipments fell for the fourth consecutive month in November, but exports to the U.S. continued to rise and shipments to China rebounded
The central bank cut rates once last year by 25 basis points, less than the easing carried out by many of its Southeast Asian peers. In November, it unexpectedly lowered the required reserve ratio for banks to help improve liquidity
Moody’s on Monday reaffirmed its A3 rating for Malaysia, citing a large, diversified and competitive economy, strong medium-term growth prospects and ample natural resources
Inflation was 0.7% in 2019, below the official forecast of 0.9%, as transport costs fell due to a blanket subsidy for petrol. The government is forecasting 2% inflation this year