Kuala lumpur: Bank Negara Malaysia (BNM) is expected to keep the overnight policy rate (OPR) steady at 2.75 per cent through the remainder of 2025, based on the assumption that Malaysia’s economic growth will remain within the official range of 4.0 to 4.8 per cent and inflation stays contained, according to an investment bank.
According to BERNAMA News Agency, RHB Investment Bank Bhd highlighted that Malaysia’s domestic demand remains robust despite external risks, supported by a strong labour market, policy initiatives, and sustained investments in infrastructure and development projects.
The investment bank noted that as 2026 approaches, the monetary policy is expected to remain data-dependent, with outcomes influenced by factors such as the impact of tariff policies on Malaysia’s trade performance and the momentum of domestic consumption. Current global developments, including signs of easing tariff and trade tensions, coupled with strong domestic demand, do not indicate another OPR cut in 2026.
Kenanga Investment Bank Bhd concurs with the expectation that BNM will keep the OPR unchanged throughout the year. However, it cautions that 2026 could present challenges as the delayed effects of higher US tariffs may necessitate policy adjustments. The bank emphasized that the current OPR, at a 29-month low, remains supportive of domestic growth, although the policy’s transmission to the real economy is still evolving. The policy direction in 2026 will also depend on fiscal policy support, with the federal government expected to propose a mildly expansionary budget for 2026. External risks, particularly from US policy uncertainty, may dominate the economic landscape.
Kenanga further pointed out that Malaysia is vulnerable to the spillover effects if US-China trade tensions escalate or if US President Donald Trump targets BRICS-linked economies. Should domestic demand weaken amid declining sentiment, BNM could consider further policy easing.
OCBC Malaysia’s senior ASEAN economist Lavanya Venkateswaran stated that there is still room for BNM to lower its policy rate by an additional 25 basis points. However, the timing of such a rate cut is uncertain, as BNM would likely require consistently disappointing data to consider further easing. Venkateswaran expects data from August onwards to show some weakness and plans to monitor key indicators, including August and September trade figures, August industrial production, wholesale and retail trade data, as well as the advance third-quarter GDP report, to evaluate BNM’s next move at its November 6 meeting. Additionally, the budget announcement on October 10, 2025, will be crucial to the interest rate outlook.