KUALA LUMPUR (June 25): HSBC Global Research is backing a 25 basis point rate cut by Bank Negara Malaysia (BNM) at its July 9 meeting, adding to a group of analysts who are similarly expecting a cut. The goal, it said, is to prevent a slowdown in domestic demand.

HSBC said that at BNM’s May meeting, the central bank took a more dovish tone, signalling it may be open to lowering rates. HSBC said it believes a cut would be wise now, given the strong ringgit and low inflation.

The research house warned that upcoming policies — such as the sales tax expansion on August 1 and changes to the RON95 fuel subsidy — could reduce household spending. However, changes to the petrol subsidy are expected to have little effect, with most likely shielded from a price hike.

UOB and CIMB Investment Bank are also expecting a cut in July, citing weak trade performance and subdued inflation. Meanwhile, Kenanga Research and RHB Investment Bank see the rate remaining unchanged for the rest of the year.

BNM last changed the OPR in May 2023, raising it to 3%.

While BNM has held off on easing, other central banks in the region — including the Reserve Bank of Australia, Reserve Bank of India and the People’s Bank of China — have all cut rates to stimulate growth amid weakening global demand and rising trade uncertainties.

The likes of Bank of Korea, Bank of Thailand and Bank Indonesia have also implemented rate cuts.