KUALA LUMPUR (Sept 17): Economists expect Bank Negara Malaysia (BNM) to raise the overnight policy rate by 25 basis points as early as November, following the US Federal Reserve’s recent rate hike and signal of another increase later this year.

Economists had already factored in a possible hike after BNM made subtle changes to its September policy statement. ANZ Research chief economist Sanjay Mathur said in his note just after the September decision that removing the word “appropriate” from the statement suggested BNM was becoming less comfortable with keeping interest rates at current levels. The firm kept its forecast for a 25 basis point hike at the next meeting on Nov 5.

“Given current market conditions and the hawkish Fed outlook, we think raising in November (this year) would be more appropriate. All things considered, and assuming an expansionary budget, we foresee a window to raising rates,” UOB Global Economics and Markets Research senior economist Julia Goh told The Edge. 

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, meanwhile, said there was a case for BNM to normalise the OPR to 3% in the near term, although he sees it happening only in 2027

“There is a case for BNM to normalise its OPR back to 3% in the near term. 2027 could be the window. I suppose the next data point to look at is the advance gross domestic product estimate for the third quarter of 2026, which will be published in October,” he said.

The advance 3Q2026 GDP estimate is scheduled for release on Oct 16. The data will provide a fresh indication of the strength of domestic economic activity and could help shape expectations for BNM’s monetary policy path.

The US dollar strengthened after the Fed’s rate hike, pushing the ringgit to a near three-month low on Thursday.

The ringgit fell to RM4.102 per US dollar, its weakest level since June 26, before recovering slightly to RM4.098 at 6pm.

Higher US interest rates can attract investors to US dollar assets, putting pressure on emerging-market currencies like the ringgit.

With the Fed funds rate projected at 4.1% in both 2026 and 2027, US assets are likely to remain more attractive, “limiting capital flows into emerging markets and reducing support for the ringgit”, said BIMB Securities. 

The research house downgraded its forecast for ringgit, expecting the local currency to depreciate further against the US dollar to 4.05 from 3.95 previously.  

“Looking further ahead, we expect USD/MYR to average 4.10 in 2027, before gradually strengthening to 4 in 2028 and 3.95 in 2029 as the Fed eventually resumes its easing cycle,” it said.

Meanwhile, MUFG Bank said should depreciation pressures intensify beyond the 4.15 level, markets may increasingly focus on the possibility of additional policy or foreign exchange support measures.

“While we remain medium-term constructive on the ringgit, the near-term environment argues for continued volatility as global markets adjust to a more hawkish Fed and higher US rates,” it said.

UOB’s Goh said: “We think there are upside risks for the US dollar, which indicates potential weakness for ringgit in near term as the rate differentials against US widens”. 

Kenanga Investment Bank expects the local note to recover towards 4 against the US dollar if expectations of further rate hikes, particularly a December hike, begin to fade.

“We maintain our year-end USD/MYR forecast of 3.95 but see 4 as the more realistic near-term anchor, with domestic variables deciding the rest. The direction of travel from current levels remains towards ringgit strength,” it said.