Stable outlook amid easing inflation and steady growth expectations
Bank Negara Malaysia (BNM) is expected to maintain its overnight policy rate (OPR) at 3.00% until at least 2026, according to a Reuters poll of economists. Despite inflation easing to 1.5% in November 2023, the lowest since March 2021, the central bank is not anticipated to make cuts due to a stable growth outlook and rising price pressures.
BNM had raised its interest rates by 125 basis points between May 2022 and May 2023, contributing to the current low inflation levels. Additionally, the Malaysian ringgit has strengthened against the US dollar by nearly 3% in 2024, further reducing the likelihood of near-term rate cuts.
The economy expanded by 3.3% annually in Q3 2023 and is forecasted to grow by 4.5% in 2024 and 4.6% in 2025, higher than the 4.1% growth in 2023. While inflation is expected to increase to 2.5% in 2024, driven by new government measures such as tax hikes and the removal of subsidies, BNM remains cautious, believing its current stance is appropriately accommodative for the economy.
