Kuala Lumpur: Although the overnight policy rate (OPR) is expected by many to stay at 3.0 per cent, some economists see a possible 25 basis points (bps) cut by Bank Negara Malaysia (BNM) as pre-emptive support against the potential downside risks of the American tariffs. They believe that business sentiment has turned bearish despite Washington’s 90-day pause on the 24 per cent import levy on Malaysia, with industries operated by both big and small companies being affected.
According to BERNAMA News Agency, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the expectation of the rate cut is also mainly due to concerns over global growth. After US President Donald Trump announced a series of reciprocal tariffs affecting countries across the board on April 2, 2025, concerns over Malaysia’s economic outlook and trade and investment prospects have expanded. The latest is that Malaysia will begin negotiating with the US next week with the hope of ensuring no tariffs are imposed, especially in key sectors. With downside revisions to growth this year from the earlier forecast of 4.5 per cent-5.5 per cent, expectations, therefore, are generally mixed ahead of Bank Negara Malaysia’s (BNM) upcoming Monetary Policy Committee (MPC) decision scheduled for tomorrow (Thursday).
Mohd Afzanizam said: “Although we are having a 90-day pause and negotiations soon, business and consumer sentiment are very guided by that which could have an implication in terms of consumption and investment decisions especially in the second half of 2025 (2H 2025).” He added that the rate cut is meant to provide a pre-emptive measure, so that in 2H 2025, there will be more support from the monetary policies angle.
In the same light, INCEIF University economic analyst Prof Baharom Abdul Hamid said that despite the 90-day pause, Trump’s actions have already affected industries ranging from multinational corporations and government-linked companies to small and medium enterprises (SMEs). He opined that a rate cut would be timely to help cushion the impact and support business sentiment. Prof Baharom noted that Malaysian exports to America are in critical sectors such as semiconductors and pharmaceuticals, and during this pause phase, demand has already started to stop as the US is uncertain about tariff impositions. He expects a chaotic period in the coming months and believes a rate cut could help reduce the impact.
Meanwhile, KSI Strategic Institute for Asia Pacific senior economic advisor Dr Anthony Dass anticipates that BNM will maintain the OPR at 3.0 per cent, while adopting a more dovish stance and signalling a willingness to ease policy later if economic data warrants it. Dr Dass stated that BNM has consistently indicated that the current OPR level supports the economy and aligns with the outlook for inflation and growth.
Furthermore, UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the MPC will likely exercise strategic patience, maintaining flexibility until greater clarity emerges. With trade negotiations with the US still in progress, any premature policy loosening could carry asymmetric risks, potentially placing downward pressure on the ringgit and amplifying imported inflation.
The OPR was the highest at 3.50 per cent in April 2006 and lowest at 1.75 per cent from July 2020 until May 2022 to support the economy during the COVID-19 pandemic. At its last meeting on March 6, 2025, the central bank maintained OPR at 3.0 per cent, which was unchanged for 12 consecutive meetings since May 2023.