Kuala Lumpur: Kenanga Investment Bank Bhd has revised its 2025 inflation forecast downward to 2.0 per cent from 2.7 per cent (2024: 1.8 per cent), while expecting Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate (OPR) unchanged.

According to BERNAMA News Agency, the investment bank stated in a research note that headline inflation averaged 1.5 per cent in the first five months of the year. The bank anticipates that inflation will increase slightly in July to around 1.5-1.7 per cent, influenced by the expanded sales and service tax (SST) and Tenaga Nasional Bhd’s tariff restructuring. It noted that further upward pressure is expected in August due to the targeted RON95 fuel subsidy cuts, although the immediate impact may be limited to a narrow segment of the population.

For the August-December period, Kenanga expects inflation to range between 2.4 per cent and 3.0 per cent, bringing the full-year average for 2025 to 2.0 per cent. The bank highlighted that risks remain skewed to the upside, primarily due to tariff uncertainty and geopolitical tensions. While there is a market consensus that anticipates one to two rate cuts by BNM in the second half of 2025, Kenanga maintains its view that the central bank will keep the OPR unchanged.

The investment bank further explained that inflation is expected to rise gradually due to structural reforms, while economic growth remains resilient. It pointed out that the current rate level continues to attract foreign capital into the bond market. However, should growth fall below 3.5 per cent and sequential quarter-on-quarter gross domestic product prints turn negative, the case for a rate cut would strengthen.