Monetary Policy Eased Sharply in Malaysia

January 21, 2009

After cutting its benchmark rate by a much larger-than-forecast 75 basis points to 2.50% and the reserve ratio by 150 basis points to 2.0%, Bank Negara Malaysia released a statement, citing the downward impact of global recession on exports, investment and inflation. This was Malaysia’s second easing and three times greater than the first one announced on November 24th. The key rate had been steady at 3.5% from April 2006 until last November. Like many central banks, officials decided to front-load stimulus. Today’s statement does not point to more cuts as the November one did, but it speaks to the urgency of the monetary support being quickly passed on to borrowing rates and for credit to remain unfrozen. World trends, namely an intensifying meltdown in financial markets, leave little down that more relief will be provided very possibly as soon as the next scheduled credit policy announcement on February 24th.


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