- Samsul Said/Bloomberg
PETALING JAYA: Economists expect targeted support measures to be implemented to help industries deal with external uncertainties.
This, they say, would be a more appropriate form of action, rather than to make continuous tweaks to the overnight policy rate (OPR).
“Instead of further adjustments to the OPR for the remainder of the year, we believe a more effective approach would be to implement targeted support measures to assist specific industries which may be vulnerable and directly affected by the external uncertainties,” said MBSB Research.
Bank Negara Malaysia (BNM) left the OPR unchanged at 2.75% at its latest Monetary Policy Committee (MPC) meeting last week, as it deemed the current rate remains appropriate and supportive of the economy.
MBSB Research said the decision to maintain the OPR was in line with its (and market) expectations.
“According to BNM, the latest indicators showed a continued expansion in global growth, driven by the robust consumer spending and front-loading activities.
“The central bank remains cautious of risk on the global front at a more moderate degree, including the outcomes coming from the potential risk of additional tariffs, especially at the product level, and ongoing geopolitical tensions.”
MBSB Research said these factors could also contribute to increased volatility in global financial markets and commodity prices.
“The recent improvement in market sentiment, recovering from tariff-induced lows, has been fuelled by growing optimism surrounding new trade deals and a notable easing of geopolitical uncertainty.
“This positive trend was further bolstered by the United States’ decision to impose a relatively lower tariff of 19% on Malaysian exports, a move that is expected to help Malaysia maintain its competitive edge among regional peers.”
However, the research house said the outlook for market stability remains uncertain.
“We anticipate that this will continue to contribute to ongoing market volatility. As a result, we continue to maintain a cautious view.”
MBSB Research opines that BNM has a “slightly more confident view” on Malaysia’s economic prospects at its latest MPC meeting last week.
It said the central bank was “relatively not as cautious” as in the MPC meeting in July, which led to the pre-emptive rate cut (to 2.75%, from 3%).
“We think that the previous pre-emptive action will be a one-off decision thus far and will not be a start of a rate-cutting cycle in the near term, overlayed by the still encouraging spending activities in the domestic economy and healthy labour market situation.”
Meanwhile, CIMB Research said the decision to maintain the OPR at 2.75% signals confidence that monetary settings remain accommodative, while providing space to evaluate the effects of July’s pre-emptive 25 basis points cut.
“BNM highlighted resilience in recent macro indicators, with gross domestic product (GDP) steady at 4.4% year-on-year in the second quarter of 2025 and exports improving by 6.8% year-on-year in July.
“Importantly, September’s MPC meeting adopted a more constructive tone, omitting earlier caveats on front-loading and noting that the conclusion of tariff negotiations has helped reduce global uncertainty.”
CIMB Research said the overall message points to a more “data-dependent approach,” with domestic demand – supported by a firm labour market, steady wage growth and fiscal measures, which are expected to cushion external trade weakness.
BNM reiterated its focus on reassessing the impact of July’s pre-emptive 25 basis points cut, while noting that muted inflationary pressures into 2026 provide scope for further easing if warranted.
“We maintain our view that the OPR will remain at 2.75% through 2025, though additional cuts cannot be ruled out should trade weakness deepen and GDP growth risk slipping below the lower bound of BNM’s 4%-to 4.8% forecast range.”
The research house noted that historical precedent supports this view.
“During the 2019 to 2020 cycle, BNM followed its initial May 2019 cut with another in January 2020, as persistent export weakness through the second half of 2019 dampened growth momentum and prompted further policy accommodation.”
Meanwhile, Maybank Investment Bank Research (Maybank IB) said the latest MPC meeting painted a balanced assessment by the central bank on the global economic outlook.
“While acknowledging lingering downside risk especially from the overhang in tariff uncertainties from product-specific tariff (notably on semiconductors) despite the finalised US reciprocal tariff rates on trading partners, the global economy is still growing amid macro policy support, a less restrictive monetary policy and fiscal stimulus.
“At the same time, the domestic real GDP growth performance in the first half of 2025 of 4.4% assured BNM that the economy is on track to meet the revised full-year economic growth forecast of 4% to 4.8% (previously 4.5% to 5.5%).”
Maybank IB said BNM expects headline inflation to remain moderate this year and added the same outlook for 2026, as the impact of the announced and upcoming domestic policy reforms on inflation is expected to be contained.
“This is reflected by the recent downward revision to the official inflation rate forecast for this year to 1.5% to 2.3% from 2% to 3.5%.
“Core inflation is projected to be stable around the long-term average in the absence of excessive demand pressures.”
