Kuala lumpur: Bank Negara Malaysia (BNM) is anticipated to keep the overnight policy rate (OPR) unchanged at 2.75 per cent during its upcoming Monetary Policy Committee (MPC) meeting. This decision is supported by the strong performance of Malaysia's external sector, moderate domestic demand, and manageable inflationary risks, according to economists. The MPC's announcement on the monetary policy decision is scheduled for Thursday.
According to BERNAMA News Agency, Dr. Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, stated that the current policy rate is deemed suitable following last year's pre-emptive measures to mitigate the impact of external shocks. He emphasized Malaysia's diversified external sector, which has significantly contributed to the economy's resilience. He highlighted that in May 2026, exports experienced a substantial year-on-year growth of 45.3 per cent, driven by a 70.5 per cent increase in the electrical and electronic sector and a 111 per cent rise in liquefied natural gas exports.
Additionally, Dr. Mohd Afzanizam pointed out that stronger exports of information and communication technology services have led to a widened services account surplus, contributing to a current account surplus of 3.0 per cent of the gross domestic product in the first quarter of 2026. However, he noted that private consumption only grew by 4.7 per cent in the same period, falling short of its historical average growth of 6.0 per cent, and the unemployment rate slightly increased to 3.0 per cent in April from 2.9 per cent previously.
Mohd Sedek Jantan, director of investment strategy and country economist at IPPFA Sdn Bhd, expressed that there is no immediate need for BNM to adjust its monetary policy unless major central banks like the US Federal Reserve, Bank of Japan, European Central Bank, or People's Bank of China implement cumulative interest rate changes exceeding 0.5 per cent. He asserted that any potential OPR hike would require a significant shift in energy prices due to geopolitical tensions, which would likely trigger supply-driven inflation rather than demand-driven.
Kashif Ansari, co-founder and group CEO of Juwai IQI, indicated that while the base expectation is for the OPR to remain unchanged throughout 2026, stronger-than-anticipated economic growth might prompt BNM to increase the benchmark rate by 25 basis points to 3.0 per cent during its September or November MPC meetings. He highlighted that such a decision would be influenced by economic activity or persistently higher oil prices impacting inflation.
Ansari further explained that the conflict in the Gulf has driven up energy prices, contributing to inflation, which reached 2.0 per cent in May, the highest in nearly two years. However, the assumption is that if peace prevails in the Gulf, inflationary pressures might ease, allowing for the restoration of subsidized fuel quotas and reducing costs for businesses and farmers, ultimately benefiting Malaysia's trade dynamics.