Malaysian central bank eases banks reserve requirement to boost liquidity

Malaysia's central bank retained its key policy rate Thursday but eased the reserve requirement for local banks to ensure liquidity.

The central bank announced a decrease in the Statutory Reserve Requirement (SRR) Ratio from 4.00 percent to 3.50 percent from February, as part of its "comprehensive effort to ensure sufficient liquidity in the domestic financial system, and to support the orderly functioning of the domestic financial markets."

At the same time, the central bank decided to maintain the Overnight Policy Rate (OPR) at 3.25 percent.

The central bank said recent external and domestic developments have continued to affect the exchange rate of Malaysian ringgit and domestic financial markets. The net external outflows have also led to a moderation in domestic liquidity.

As a major oil and gas exporter in the region, Malaysia was affected by the falling oil prices. Prime Minister Najib Razak is scheduled to table a revised budget next week in response to the oil prices that have tumbled below 30 U.S. dollars per barrel. The original budget was based on the presumption of oil prices of 48 U.S. dollars per barrel.

The central bank said Malaysia's economy was expected to experience more moderate growth this year, after expanding by about 5 percent in 2015, in the face of greater uncertainty on both the global and domestic fronts.

The government has expected the economy to expand by 4 percent to 5 percent in 2016. Endit