Kuala lumpur: Bank Negara Malaysia (BNM) has the flexibility to lower the overnight policy rate (OPR) but sees no immediate need to do so due to the country’s robust economic outlook, stated Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid. He noted that the real interest rate currently stands at 1.25 percent, which is above the long-term average, suggesting a tight monetary policy in real terms.
According to BERNAMA News Agency, Dr. Mohd Afzanizam explained that while the interest rate remains high in real terms, any decision to reduce it would depend on the evolving economic landscape. He emphasized that Malaysia’s economic prospects remain resilient, negating any urgency for BNM to cut the OPR in the near term. The decision to maintain the OPR at 2.75 percent demonstrates BNM’s confidence in domestic demand despite global challenges.
Dr. Mohd Afzanizam further highlighted concerns such as slower global trade and weaker sentiment, but noted that inflation is expected to moderate by 2026. The current monetary policy stance is deemed appropriate to support growth, which could have a positive effect on the ringgit, especially with anticipated rate cuts by the United States Federal Reserve (Fed) by December into 2026.
On Thursday, BNM announced the decision to maintain the OPR at 2.75 percent at its final Monetary Policy Committee meeting for 2025. The central bank considers this monetary policy stance supportive of the economy amid stable prices.
IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan also noted Malaysia’s capacity to maintain the current rate due to the absence of sharp economic downturn indicators. He cautioned against hasty rate cuts, which could increase risks such as higher household debt and asset price imbalances.
Mohd Sedek emphasized that maintaining the OPR provides stability for businesses and consumers, supports savings and investments, and allows for gradual policy adjustments. From a foreign investor’s perspective, the decision reflects consistency and prudent risk management, contrasting with the immediate policy responses seen after the Federal Open Market Committee’s recent rate cuts.
He anticipates that BNM will maintain the OPR at 2.75 percent until the Fed rate decreases to 3.00-3.25 percent, expecting the Fed to implement further rate cuts. He observed that significant Fed rate cuts could influence Malaysia’s economic path and prompt BNM to reassess its policy stance.