KUALA LUMPUR: The decision to cut the Overnight Policy Rate (OPR) is a preemptive action to ensure that the economy continues to remain on a steady growth path, said Bank Negara Malaysia governor Datuk Muhammad Ibrahim.

"It's not that we expected growth to be weaker in the second half. We anticipate it to be stronger and that growth for the whole year is expected to remain between four and 4.5 per cent.

"Now, what we intend to do is to ensure that this happens. Basically, it is a preemptive move," he said in an interview.

Bank Negara, in a unexpected move on Wednesday, slashed the OPR by 25 basis points to three per cent.

The last rate cut was in 2009.

On the rationale for the rate cut, Muhammad said the window of opportunity had presented itself as inflation had gone lower than expected, among others.

Inflation is projected to be lower at two to three per cent this year compared with an earlier projection of 2.5 to 3.5 per cent, while remaining stable next year.

"The window of opportunity is there. We just took it in our stride and say, look let's give a boost to the economy, create an enabling environment so financing will be healthy, economic activities can prosper and people are able to generate more wealth and income," said Muhammad.

Currently, there were no plans by the Monetary Policy Committee to change interest rates over the next few meetings, he added, stressing that the central bank would always look at data objectively and see what was needed.

"So, to say that there will be a series of rate cuts is not true. But it's true we will keep an open mind every time we sit down for the meeting."

Muhammad said the central bank, given the dynamic environment, looked at many factors when deciding on the monetary policy, including developments in other countries.

However, a decision on the monetary policy is ultimately based on domestic considerations and has always been forward-looking.

"In any monetary policy (decided) around the globe, when we look at what level it should be, we always look a few quarters forward to see how the economy will develop.

"We project what the growth will be in the second half of this year and next year, and we take our position in deciding the interest rate," explained Muhammad.

Malaysia recorded an economic growth of 4.2 per cent in the first quarter of the year and the second quarter figure is expected to be released next month. Bernama