KUALA LUMPUR: MalaÂysia on Wednesday cut interest rates for the first time in seven years in a shock move as the economy struggles with weak exports and an uncertain global outlook.
The decision to slash borrowing costs by 25 basis points to 3.00 per cent follows similar moves by Singapore and Indonesia and comes as major central banks around the world look to ease monetary policy to kickstart growth.
“Exports are projected to remain weak following more subdued demand from Malaysia’s key trading partners,” Bank Negara said in a statement.
The benchmark rate has been kept steady since July 2014, when it was raised by 0.25 percentage point, but it is the first cut since 2009.
“It is a pleasant surprise. The policy cut is in tandem with other regional economies. It would support much needed growth,” Kenanga Research economist Wan Suhaimi Saidi told AFP.
Malaysia’s economy expanded 4.2pc in the first quarter, its slowest rate since a 1.1pc contraction in the third quarter of 2009 during the global financial crisis.
The figure was also the fifth straight quarter of slowing growth, adding to pressure on policymakers as the price of oil – a key export – remains subdued, denting revenues and putting severe pressure on the ringgit.
The move comes just over two months into the tenure of new bank governor Muhammad Ibrahim, who replaced Zeti Akhtar Aziz after 16 years at the helm.