Kuala lumpur: Bank Negara Malaysia (BNM) is projected to maintain its overnight policy rate (OPR) at 2.75 percent through 2026, driven by contained inflation and robust domestic growth, according to Kenanga Investment Bank Bhd (Kenanga IB).

According to BERNAMA News Agency, Kenanga IB noted that with reduced price pressures, inflation is anticipated to average around 2.1 percent in 2026. However, disruptions in the Strait of Hormuz pose an upside risk through increased costs of imported fuel, fertilizer, and logistics. The investment bank stated that resilient domestic demand, with growth tracking towards the upper end of its 4.5 percent to 5.0 percent forecast range and controlled underlying inflation, should enable BNM to maintain the OPR at 2.75 percent through the stipulated period.

Kenanga IB emphasized that policy stability would remain a priority, with supply-driven inflation, a relatively stable ringgit, and ample policy space allowing BNM to navigate temporary shocks. The investment bank also expressed a positive medium-term outlook on the ringgit, predicting the local currency to appreciate to RM3.95 against the US dollar by the end of 2026 and further to RM3.90 by the end of 2027. This forecast is attributed more to a general weakening trend in the US dollar than the anticipated trajectory of the US Federal Reserve's monetary policy.

Domestic fundamentals continue to be supportive, with foreign currency deposits reaching a record RM316 billion in May, indicating a significant potential for conversion into the ringgit over time. Kenanga IB also mentioned that while recent incidents highlight the fragility of the West Asia ceasefire, both sides have incentives to maintain it, expecting that intermittent violations will persist without undermining the broader framework.