KUALA LUMPUR - Malaysia's central bank unexpectedly cut interest rates for the first time in seven years, joining Asian counterparts from Indonesia to Taiwan which have eased policy this year to bolster their economies as global risks mount.
Bank Negara Malaysia lowered the overnight policy rate by 25 basis points to 3%, it said in a statement on Wednesday in Kuala Lumpur. Reza Siregar of Goldman Sachs Group Inc was the only one of 18 economists surveyed by Bloomberg News that predicted a reduction, with the rest expecting no change.
"They assess that the external risks have reverted much higher," Julia Goh, an economist at United Overseas Bank Ltd in Kuala Lumpur, said before the decision. "Probably the domestic sources of growth will not be sufficient to cushion the downside risks from the external side."
Just two months into the job, governor is facing increased pressure to lower borrowing costs to spur an economy projected to expand at the slowest pace in seven years amid falling oil revenue and weaker exports. The UK's surprise decision last month to leave the European Union has clouded the global growth outlook, denting demand for Malaysian goods.
The central bank cut its inflation forecast for this year to 2-3% from 2.5% to 3.5%. Consumer prices rose 2% in May from a year ago.
The currency has strengthened 7.5% against the dollar this year, the best performer in Asia after Japan's yen.