KUALA LUMPUR, Nov 24: Malaysia’s central bank on Monday cut its interest rate by 25 basis points to 3.25 per cent in a bid to boost growth amid the global economic crisis.

“Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) to 3.25 per cent. The ceiling and floor rates of the corridor for the OPR are correspondingly reduced to 3.50 per cent and 3.00 per cent respectively,” it said in a statement.

The bank said the global downturn has already affected the Malaysian economy with a slowdown in export performance and lower equity prices.

“Under these conditions, sustaining domestic demand is key to ensuring that growth in 2009 remains positive,” the bank said.

However, it added that the risk to domestic price stability is now substantially reduced as inflation has begun to moderate from its peak in the third quarter of 2008.

Inflation jumped to a 26-year high in August of 8.5 per cent, driven by the high cost of food and fuel following a steep 41pc fuel price hike.

However, it fell to 7.6 per cent in October after the government cut retail fuel prices.

The central bank said the lower cost pressures and the slowdown in demand are also expected to exert a greater dampening influence on inflation.

“Inflation is, therefore, expected to moderate significantly, particularly in the second half of 2009,” it said.

Going forward, the bank said global economic and financial conditions are expected to remain volatile and uncertain.

“Bank Negara Malaysia will monitor closely the evolving developments and will undertake the appropriate policy response to avoid a severe economic downturn,” it said.

Earlier this month, the government cut its 2009 growth forecast to 3.5 per cent from its initial target of 5.4 per cent. It also revised downward its 2008 GDP forecast to 5.0 per cent.—AFP