Kuala Lumpur: Hong Leong Investment Bank Bhd (HLIB) has maintained expectations for Bank Negara Malaysia (BNM) to lower the overnight policy rate (OPR) by 25 basis points to 2.75 per cent in the second half of 2025, if economic conditions warrant.

According to BERNAMA News Agency, key factors to be monitored include the United States’ upcoming economic data releases, such as the May inflation data on June 27, the US June nonfarm payroll on July 3, and Malaysia’s May trade release on June 20. Developments in Malaysia-US tariff negotiations, expected to conclude by July 9, and any escalation in geopolitical tensions in the Middle East are also critical points of observation.

It was reported that the US Federal Reserve (Fed) has maintained its interest rate at 4.25 to 4.50 per cent for the fourth consecutive meeting. The Fed reiterated that it is awaiting further information on the extent of tariff pass-through, while noting that the labour market remains relatively stable. HLIB noted that while the Fed has downgraded its growth forecast, it has raised its inflation projection. Reflecting these mixed signals, the median forecast for two cuts, totaling 50 basis points, was unchanged. However, a closer look at the individual dot plot reveals a more cautious stance.

Citing data from the Federal Open Market Committee (FOMC), HLIB stated that the FOMC has observed recent indicators pointing to continued solid growth in US economic activity. Unemployment remains low, and labour market conditions remain solid, but inflation stays somewhat elevated. The committee seeks to achieve maximum employment and inflation at the 2.0 per cent rate over the longer run. In considering the extent and timing of additional adjustments to the target range for the Fed funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks, and will continue to reduce its holdings of treasury securities and agency debt and agency mortgage-backed securities.