KUALA LUMPUR (April 30): Malaysia’s central bank will likely stand pat on policy rate at next week’s review though benign inflation opens the door for a cut later this year, says HSBC.
Bank Negara Malaysia (BNM) will wait and see while trade negotiations unfold during the 90-day pause on tariffs, but it may start to cut the overnight policy rate by 25 basis points as soon as July amid mounting downside risks to economic growth, the bank said in a note.
For now, HSBC said it will be watching the special parliamentary session on May 5 for “qualitative” signs of a potential rate cut.
BNM has kept the benchmark rate unchanged since it was raised in May 2023, bucking recent rate cuts in Southeast Asia, thanks to resilient economic growth and manageable inflation. However, external risks are intensifying as US tariffs threaten to upend global trade.
Flash estimates showed that Malaysia’s gross domestic product (GDP) growth may have moderated to 4.4% in the first quarter of 2025, and the government is now negotiating with the US about a sweeping reciprocal tariff.
Domestic demand has been the key driver for growth but Malaysia will be affected by tariff headwinds, especially in the electronics sector, which accounts for 6% of GDP in shipments to the US — the third highest ratio just after Vietnam and Taiwan, HSBC noted.
BNM Governor Datuk Seri Abdul Rasheed Ghaffour has talked about a lower GDP growth forecast for 2025, currently projected between 4.5% and 5.5%, at the Spring Meeting of the International Monetary Fund and the World Bank last week.
In 2024, Malaysia’s GDP grew by 5.1%.