Tag: Bank Negara Malaysia (BNM)

BNM expected to maintain OPR at 2.75 percent – Economist

KUALA LUMPUR,  July 8 --  Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 2.75 percent at its Monetary Policy Committee (MPC) meeting, supported by resilient external sector performance, moderate domestic demand and manageable inflation risks, economists said. The MPC is scheduled to announce its latest monetary policy decision on Thursday.     External Resilience Supports the Status Quo Bank Muamalat Malaysia Bhd Chief Economist, Dr Mohd Afzanizam Abdul Rashid said the current policy rate was still appropriate following the initial easing last year to mitigate the impact of external shocks. "Malaysia's highly diversified external sector really contributes to economic resilience," he told Bernama. He said exports grew at a strong rate of 45.3 percent year-on-year in May 2026, supported by 70.5 percent growth in the electrical and electronics sector, while liquefied natural gas exports surged 111 percent. Higher exports of information and communication technology services have also increased the services account surplus, contributing to the current account surplus, which increased to 3.0 percent of Gross Domestic Product in the first quarter of 2026, he said. Mohd Afzanizam said, however, private consumption grew by 4.7 percent in the first quarter of 2026 and was below the previous average growth of 6.0 percent while the unemployment rate increased slightly to 3.0 percent in April from 2.9 percent previously. "The move to maintain a stable OPR is a strategic priority to enable the Malaysian economy to grow at a good pace in the second half of 2026," he said. Limited Justification for Rate Increases Meanwhile, Director and Investment Strategy and Economic Analyst of IPPFA Sdn Bhd, Mohd Sedek Jantan said that currently there is no urgent need for BNM to adjust monetary policy unless major central banks, including the United States Federal Reserve (Fed), Bank of Japan, European Central Bank or People's Bank of China, make cumulative interest rate changes of more than 0.5 percent. He said the threshold for an OPR hike remains high because higher energy prices stemming from geopolitical tensions may result in supply-driven inflation rather than demand-driven inflation. "BNM is expected to be more inclined to examine temporary energy price shocks while assessing their impact on underlying inflation and economic growth," he said. He said the OPR was likely to remain at 2.75 percent for the rest of this year. If BNM and the Fed each maintain their policy rates, the ringgit's performance will largely depend on interest rate differentials and Malaysia's trade momentum, which will remain supportive in the second half of 2026. Possible Rate Hike If Growth Beats Expectations Co-founder and Group CEO of Juwai IQI, Kashif Ansari said that although the baseline projection is for the OPR to remain unchanged throughout 2026, stronger than expected economic growth could prompt BNM to raise the benchmark rate by 25 basis points to 3.0 percent at the September or November MPC meeting. He said such a move could be driven by stronger-than-expected economic activity or persistently higher oil prices causing inflation. “We still believe the MPC will maintain the current policy rate for the rest of 2026. If the MPC were to raise the rate by the end of the year, it would likely be driven by a much stronger economic performance than most analysts currently expect. "Apart from strong economic growth, the single biggest factor that could cause BNM to raise the rate by the end of 2026 is oil prices as they have a significant impact on inflation," he said. He said the conflict in the Gulf had driven up energy prices, which in turn led to inflation. "Headline inflation reached 2.0 percent in May, the highest in almost two years, however, if lasting peace in the Gulf can be achieved, inflation could ease." "This will open up space for efforts to restore subsidized fuel quotas, cheaper diesel for businesses and farmers, and lower shipping costs for Malaysian export and import goods," he said. -- BERNAMA 

KUALA LUMPUR,  July 8 —  Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 2.75 percent at its Monetary Policy Committee (MPC) meeting, supported by resilient external sector performance, moderate domestic demand and manageable inflation risks, economists said. The MPC is scheduled to announce its latest monetary policy decision on […]