Following Bank Negara Malaysia’s (BNM) decision to keep the overnight policy rate (OPR) at 3%, economists anticipate no changes for the rest of 2025. The move aligns with predictions from a Bloomberg survey of 23 economists, citing policy flexibility amid potential US tariff impacts.
BNM’s Monetary Policy Stance
This marks the eleventh consecutive Monetary Policy Committee (MPC) meeting where the OPR has remained at 3%, following a 25-basis-point hike from 2.75% in May 2023. Economists believe BNM’s decision is driven by stable economic conditions and controlled inflation.
Economic Growth and Inflation Outlook
RHB Research projects Malaysia’s GDP growth at 5% in 2024, with Q1 growth estimated between 4.9% and 5%. The forecast is supported by increased consumer spending, investment, and expansion in trade and manufacturing. Inflation is expected to remain subdued at 2.4%, within the official forecast range of 2% to 3.5%.
However, external factors such as global tariff policies and supply chain disruptions pose potential risks. While Malaysia's export sector is somewhat shielded from direct US protectionism, indirect effects through key trade partners like China could be significant.
Inflation Risks from Subsidy Rationalisation and Rising Costs
UOB Global Economics & Markets Research flagged potential inflation risks from RON95 fuel subsidy rationalisation, price adjustments in essential goods, and higher electricity tariffs in the latter half of 2024. Additionally, rising operational costs due to increased minimum wages, foreign worker levies, and mandatory EPF contributions could exert further price pressures.
Ringgit’s Near-Term Volatility and 2H2025 Outlook
RHB Research predicts short-term volatility for the ringgit due to cautious global investor sentiment amid tariff tensions, geopolitical developments, and US monetary policy shifts. However, an improved fiscal position, current account balance, and a narrowing interest rate differential between the US dollar and ringgit could drive recovery in 2H2025.
MIDF Research expects US monetary policy easing to be more gradual than initially anticipated, maintaining a wide interest rate differential in the near term. However, eventual narrowing could strengthen emerging market currencies, including the ringgit.
As economic conditions evolve, analysts will continue to monitor global trade developments and their impact on Malaysia’s monetary policy landscape.