KUALA LUMPUR (Nov 6): Bank Negara Malaysia (BNM) may keep the benchmark interest rate unchanged until at least the middle of next year before a potential easing amid signs of softer external demand and moderating growth momentum, economists said on Thursday.
The central bank, at its Monetary Policy Committee (MPC) meeting earlier in the day, maintained the overnight policy rate (OPR) at 2.75%, in line with market expectations.
The last policy adjustment was in July 2025, when BNM delivered a surprise 25-basis-point (bp) rate cut as a “pre-emptive measure” to support growth amid rising external uncertainties.
The next MPC meeting is scheduled for Jan 22, 2026.
CIMB Treasury and Markets Research said it expects the OPR to remain unchanged in the first quarter of 2026 (1Q2026) "as growth should stay supported by firm domestic demand — underpinned by festive-related spending during Chinese New Year, Ramadhan, and Hari Raya, alongside another RM100 cash disbursement for Malaysians aged 18 and above in mid-February 2026".
However, it said a slowdown on the external front is likely to emerge, amid softer demand from major trading partners, which will weigh on Malaysia’s overall export outlook.
"Consequently, we now expect a 25bp rate cut in 2Q2026 (May MPC meeting)," said CIMB in a note.
IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said BNM could consider a "preemptive 25bp rate cut by mid-2026" if growth weakens below expectations.
“If the US Federal Reserve delivers more than three cuts in 2026 — or cumulative easing exceeding 75bps — it could initially amplify capital inflows into higher-yield emerging markets [like Malaysia], but also heighten volatility from US dollar weakness and potential policy reversals,” he told The Edge.
“For Malaysia, this might manifest as ringgit appreciation pressures, reduced export competitiveness, and softer FDI (foreign direct investment) inflows. In response, BNM could act preemptively to cushion the slowdown while guarding against imported disinflation,” he added.
OCBC Bank senior Asean economist Lavanya Venkateswaran, in a report on Thursday, noted that exports to the US were significantly higher in the first few months of 2025 compared to previous years, suggesting there could be some payback in early 2026.
She said the US' potential semiconductor tariffs will weigh on Malaysia’s electrical and electronics exports, which account for nearly 70% of total exports to the US.
“Our base case remains for another 25bp rate cut from BNM in 2026, given our softer GDP (gross domestic product) growth forecast,” she added. The bank has projected a GDP growth of 3.8% in 2026, down from 4.6% this year.
'Current developments don't indicate another OPR cut in 2026'
Some economists, meanwhile, do not expect a rate cut for a longer period, with monetary policy likely to stay data-dependent in upcoming MPC meetings.
“Current developments — including signs of easing global tariff and trade tensions, alongside solid domestic demand — do not indicate another OPR cut in 2026,” RHB Global Economics & Market Strategy said in a note. It projects GDP growth at 4.7% and inflation averaging 1.8% next year.
UOB Global Economics & Markets Research said the latest policy decision reflects BNM’s confidence that the current OPR level remains supportive of both economic growth and price stability, citing ongoing fiscal support and easing trade risks.
"Overall, the language of the latest monetary policy statement is balanced, with clear delineation of downside and upside risks alongside moderate inflation expectations," UOB said.
Economists think the downside risks from slower global trade, weaker business sentiment, and lower-than-expected commodity production may be offset by the upside potential that could stem from stronger global growth, firmer demand for electrical and electronics goods, and robust tourism recovery.
Malaysia's headline and core inflation have remained mild, averaging 1.4% and 1.9% year to date, respectively. Economists expect this trend to continue amid moderate commodity prices and limited cost-push pressures, with BNM viewing the inflationary impact of recent domestic policy reforms as contained.