Kuala lumpur: Resilient domestic demand and contained underlying inflation are anticipated to allow Bank Negara Malaysia (BNM) to maintain the overnight policy rate (OPR) at 2.75 percent throughout 2026, according to Kenanga Investment Bank Bhd (Kenanga IB).

According to BERNAMA News Agency, Kenanga IB noted in a research report that while headline inflation has remained stable, ongoing disruptions around the Strait of Hormuz present potential risks due to increased costs of imported fuel, fertiliser, and logistics. The investment bank emphasized that maintaining policy stability should remain a central goal. It stated that the combination of heightened external uncertainties and a relatively stable ringgit affords the central bank ample flexibility to keep the OPR unchanged.

Kenanga IB also discussed its year-end forecast for the US dollar to ringgit exchange rate, which it expects to remain at 3.95. This prediction is influenced more by the anticipated structural weakening of the US dollar rather than specific cuts in US Federal Reserve interest rates. The forecast is further supported by factors such as reserve diversification, portfolio reallocation, and growing concerns about US fiscal sustainability.

The investment bank highlighted that domestic economic fundamentals are robust, as evidenced by foreign currency deposits reaching a record RM305.8 billion in April. This figure underscores the substantial potential for conversion into the ringgit over time. However, Kenanga IB cautioned that risks are becoming more balanced. While geopolitical tensions in West Asia could sustain higher oil prices, inflation expectations, and demand for the US dollar, domestic political developments are increasingly viewed as a key source of market sensitivity.