KUALA LUMPUR, Nov 3 — Bank Negara Malaysia (BNM) kept its Overnight Policy Rate (OPR) at 1.75 per cent today but left the door open for future cuts, according to OCBC Bank economist Wellian Wiranto.

He said while the risk of a cut had gone up recently due to the uptick in pandemic challenges and political bickering, it was not enough to tip the scale.

"BNM appears to sound relatively sanguine on the growth outlook, pointing out significant improvement in economic activity.

"But it continued to warn about downside risks to growth, not least due to the pandemic outbreak,” he said in a research note today.

While noting that the current policy stance remains appropriate, BNM stressed that it was committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery.

"In short, BNM has left the door open for a rate cut. Much would depend on how the economic recovery shapes out in the fourth quarter (Q4) and beyond, as the impact of global lockdowns and the upcoming United States election come through,” added Wellian.

Overall, he said the central bank looked like it was seeking to strike a balance on multiple fronts whereby even as it acknowledged the downside risks, the central bank wanted to note that the outlook remained brighter than what the headlines might suggest.

Similarly, in terms of policy actions, BNM portrays the current policy stance as being still "appropriate and accommodative” by reminding how it has enacted a cumulative 125 basis points of OPR reduction this year.

"And yet, it has left the door open to act if necessary. Lifting verbatim in length from the statement: ‘Bank Negara’s Monetary Policy Committee (MPC) will continue to assess evolving conditions and their implications to the overall outlook for inflation and domestic growth’,” he said.

Wellian said the central bank would not hesitate to act by cutting its policy rate if it deemed that the downside risks it mentioned began to weigh on growth momentum more visibly.

"In particular, if Q4 outturn gets impacted even more, either because of a slump in exports or an enforced shutdown of business activities, then BNM would be coming in fast.

"Even though the next MPC meeting would not take place until Jan 19-20, 2021, if push comes to shove, there might even be an inter-meeting decision to cut as well, if necessary,” he said.

He said that was still not OCBC Bank’s baseline, but the next few weeks — in terms of both domestic virus fight and global economic and financial market developments post-US-election — would be the key determinants. — Bernama