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Economists see BNM holding OPR through 2026, with gradual rate normalisation next year
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KUALA LUMPUR (July 9): Economists broadly expect Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at 2.75% for the rest of 2026, before embarking on a gradual monetary policy normalisation cycle next year on resilient economic growth and manageable inflation.
The central bank kept the benchmark rate unchanged at 2.75% on Thursday, matching expectations in a Bloomberg survey of economists. The OPR has been at this level since July 2025.
In its monetary policy statement, BNM noted that its current stance remains "appropriate and consistent with the outlook of continued price stability and sustainable economic growth". The central bank expects the economy to expand between 4% and 5% in 2026, with inflation averaging at 1.5%-2.5%.
The economy expanded 5.4% year-on-year in the first three months of 2026, even as war in the Middle East raged on.
OCBC Bank expects BNM to hold the OPR flat throughout 2026 before delivering a 25-basis-point hike to 3% in early 2027. Likewise, BIMB Securities expects policy normalisation to begin next year when geopolitical tensions subside, forecasting the benchmark rate would reach 3% in 2027 and 3.25% in 2028.
“With inflation remaining manageable, labour market conditions firm and export momentum supported by the AI and semiconductor upcycle, BNM is likely to have greater flexibility to gradually normalise policy settings from 2027 while preserving growth momentum,” BIMB Securities said in a note.
MBSB Research, which has raised its 2026 gross domestic product (GDP) growth forecast to 4.5% from 4.2% previously, believes the worst-case scenario in the Middle East conflict has passed.
Its upward GDP growth revision reflects the stronger-than-expected momentum in the first half of this year amid a surge in exports and steady domestic demand, alongside signs of easing external risks.
Still, MBSB Research flagged that the full impact of the higher cost has yet to fully materialize, and expects headline inflation to edge higher to 2% in 2026 from 1.4% in 2025.
The consumer price index rose 2% in May from a year earlier, its highest increase since July 2024.
Breaking away from the consensus, ANZ Research maintained its forecast for a 25-basis-point rate hike in the second half of 2026.
“Renewed tensions in the Middle East continue to cloud the outlook and justify a degree of policy patience.
“That said, if growth proves resilient and inflation continues to firm gradually, as we expect, the case for maintaining last year’s precautionary 25 basis-point rate cut would become less compelling,” ANZ Research explained.
Article By Justin Lim / theedgemalaysia.com
Edited By Tan Choe Choe
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