Malaysia's central bank Wednesday slashed the key policy interest rate by 75 basis points - its biggest cut since 2004 - in a bid to cushion the weakening economy and avert a recession. In its first policy meeting of the year, Bank Negara Malaysia cut its benchmark overnight policy rate (OPR) to 2.5 percent from 3.25 percent, effective immediately.
It also cut the statutory reserve requirements (SSR) to two percent from 3.5 percent effective February 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," Dow Jones Newswires said, quoting a statement from the central bank.
The cut was more than the 50 basis points forecast by nine of 15 economists polled by Dow Jones Newswires. Since introducing the benchmark rate in April 2004, the central bank has cut rates only once - less than two months ago, when it trimmed rates by 25 basis points on November 24. Wednesday's cut aligns Malaysia with other regional central banks in aggressively easing policy to help their economies weather the global economic slowdown.