KUALA LUMPUR: Investment banks expect Bank Negara Malaysia (BNM) to lower the Overnight Policy Rate (OPR) by 25 basis points (bps) in the second half of 2025 (2H 2025) amid softer first quarter (1Q) growth and tariff disruptions.
Public Investment Bank Bhd said the earlier 100 bps reduction in the Statutory Reserve Requirement (SRR) is expected to serve as a timely liquidity buffer, allowing BNM to maintain a data-dependent stance amid elevated external volatility.
Should the 90-day tariff suspension lapse without renewal, raising Malaysia’s effective tariff exposure to 24 per cent, the investment bank anticipated a more front-loaded policy response, comprising two 25 bps OPR cuts in 2H 2025.
"This would be intended to mitigate negative spillovers on trade performance, investment activity and broader economic sentiment.
"With three scheduled policy meetings remaining this year -- July 9, Sept 4 and Nov 6 -- the window for calibration remains open, though timing will depend on incoming data and developments surrounding global trade negotiations,” it said in a note today.
Meanwhile, Hong Leong Investment Bank said the projection was made in view of external uncertainties and modest inflationary environment.
As for Standard Chartered (StanChart), it continued to expect BNM to cut the policy rate by 25 bps in July, with more cuts (beyond 25 bps) in 2025 likely if data deteriorates by more than expected.
The bank has lowered its 2025 gross domestic growth (GDP) growth forecast to 4.2 per cent from 5.0 per cent previously on weaker-than-expected 1Q GDP growth and tariff disruptions.
"We estimate that a 24 per cent and 10 per cent reciprocal tariff rate will subtract 0.7 percentage point (ppt) and 0.4 ppt respectively, from GDP, assuming that 30 per cent of Malaysia’s exports are exempt from tariffs and a United States (US) import elasticity rate of 0.5 times.
"The hit to GDP from a fall in demand of trading partners will also likely weigh on growth in 2025,” it said.
Nevertheless, StanChart expects consumer spending and investment are likely to remain the key pillars of growth in 2025. - Bernama
