Malaysia cuts reserve ratio to ensure enough liquidity

    Malaysia’s central bank lowered its minimum reserve requirement for commercial banks by 50 basis points to 3.0 percent, underscoring this is to ensure sufficient liquidity in the domestic financial system and not “a signal on the stance of monetary policy.”
     Bank Negara Malaysia (BNM), which earlier this week left its benchmark interest rate steady at 3.0 percent, added in a statement on Nov. 8 the cut in the Statutory Reserve Requirement (SRR) would take effect on Nov. 16.
     It said SRR is an instrument to management liquidity and the cut will support the functioning of the domestic financial markets and facilitate liquidity management by banks.
     It is BNM’s first change in SRR since Feb. 1, 2016 when it was lowered 50 basis points to 3.50 percent.
     During 2011 SRR was raised three times (April, May and July) to 4.0 percent from 1.0 percent, the level it was cut to during the Global Financial Crises. Since July 2011 SRR was then maintained at 4.0 percent until February 2016.
     ”The Overnight Policy Rate (OPR) is the sole indicator used to signal the stance of monetary policy” and announced after a meeting of the monetary policy committee.

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