Malaysia: Bank Negara Malaysia leaves rates unchanged in January
Bank stands pat as expected: At its meeting on 22 January, the Monetary Policy Committee of Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 2.75%, where the rate has stood since July 2025. The decision matched market expectations.
Inflation to remain tame and domestic demand to stay resilient: The BNM abstained from a hike as it expects both headline and core inflation to remain moderate in 2026, reflecting low global commodity prices and a lack of excess demand in the economy. Meanwhile, a cut was off the table as the Bank foresees both domestic demand and GDP growth remaining resilient in 2026.
Majority of panelists expect no rate changes in 2026: The majority of our panelists expect the OPR to end 2026 at current levels, which the BNM has deemed “to be appropriate and supportive of the economy amid price stability”. Still, a minority of panelists see a 25 basis point cut by year-end, which could be motivated by slowing GDP growth. Meanwhile, one panelist expects the BNM to raise the OPR this year. Key factors to watch include the strength of the economy and the impact of U.S. tariffs on the external sector.
The BNM will reconvene on 5 March.
Panelist insight: United Overseas Bank’s Julia Goh and Loke Siew Ting commented:
“With global tariff risks receding as well as domestic fiscal and monetary policies staying supportive, we reckon that BNM has more flexibility to stay on hold this year. While recent data strength amid robust 4Q25 advance GDP, firm trade performance, and a strong MYR have pivoted some market views towards the possibility of a rate hike, our baseline view remains no change in OPR for 2026 given lingering downside risks to the domestic growth outlook and elevated external volatility.”
Nomura’s Euben Paracuelles and Yiru Chen said:
“We maintain our forecast that BNM will hike its OPR by 25bp to 3.00% by Q4, based on our optimistic view on the growth outlook. We forecast 2026 GDP growth of 5.2%, well above the official forecast range of 4.0-4.5%, still underpinned by robust domestic demand, while we think export growth will likely benefit from a sustained global tech uptrend. […] Our sense from BNM is that it is open to normalization and will likely consider a reversal of the pre-emptive cut in July 2025, if the growth outlook exceeds its expectations and/or global unc?ertainty dissipates.”