Kuala Lumpur: RHB Investment Bank Bhd (RHBIB) has maintained its base case forecast for the Overnight Policy Rate (OPR) at 3.00 percent throughout 2025. The bank noted the potential for a 25-basis point cut in the second half of 2025, contingent on Malaysia’s gross domestic product (GDP) growth falling below 4.0 percent. Key factors for OPR decisions include Malaysia’s economic momentum, inflation trajectory, and global interest rate direction.

According to BERNAMA News Agency, Bank Negara Malaysia (BNM) has shifted its policy focus beyond interest rates to counteract US tariff actions and rising trade tensions. RHBIB indicated a possible rate cut if domestic demand and labor market conditions weaken significantly. The bank revised Malaysia’s 2025 GDP growth forecast to 4.5 percent, down from 5.0 percent, with risks leaning towards a 3.5 – 4.0 percent range if trade tensions escalate.

RHBIB maintained its year-end ringgit forecast at 4.2-4.3 per US dollar, supported by positive economic growth, fiscal reforms, and narrowing US dollar-ringgit real rates differences. However, foreign inflow fluctuations and US foreign policy uncertainties could introduce FX market volatility, impacting the ringgit.

Inflation is expected to remain manageable in 2025, with RHBIB forecasting a rate of 2.2 percent, aided by easing global commodity prices and subdued domestic demand pressures. Meanwhile, OCBC senior ASEAN economist Lavanya Venkateswaran observed that BNM seemed more dovish compared to its March 6 meeting, suggesting possible interest rate cuts.

BNM reduced the Statutory Reserve Requirement (SRR) by 100 basis points to 1.0 percent, releasing RM19 billion of liquidity effective May 16, as a measure to support liquidity conditions. The SRR cut is not an indicator of monetary policy stance, but historically, it has often preceded or accompanied OPR cuts. In the previous easing cycle, a 50 basis point SRR cut in November 2019 was followed by a 25 basis point OPR cut in January 2020, with further reductions at the March 2020 meeting. BNM’s Monetary Policy Committee has maintained the OPR at 3.0 percent.