PETALING JAYA: The overnight policy rate (OPR) is likely to remain at the current level of 2.75%.
This is so given that there are high expectations that gross domestic product (GDP) growth this year would be able to hit at the upper end of the government’s GDP forecast growth range of 4% to 4.8%.
This is despite a cut by the United States’ Federal Reserve (Fed) officials of a quarter-point rate last Wednesday which had lowered the country’s benchmark lending rate to a range between 3.75% and 4%, the lowest in three years.
Also the earlier move by Bank Negara Malaysia (BNM) to cut rates by 25 basis points to 2.75% back in July was termed as a pre-emptive move which means that rates now are at the lower end of economist expectations for the year.
Before that the OPR had been maintained at 3% since May 2023.
The sixth and final Monetary Policy Committee (MPC) meeting is scheduled to be held this Thursday, and the MPC’s decision on the local OPR will be known at 3pm on that same day.
Socio Economic Research Centre’s executive director and economist Lee Heng Guie said it is more than likely there will be no further rate cuts at the next MPC meeting.
“For the full year’s GDP growth, I believe the country can meet the revised growth target of 4% to 4.8%, and they can hit the higher end of these estimates,” Lee told StarBiz.
However, next year’s economic story is still to unfold and there could be new uncertainties being introduced pending the finalisation of a firm outcome for the United States and China trade talks which is still a potential wildcard, Lee said.
“Next year’s outlook is still seen to be challenging – that’s a slightly lower growth that is being forecast.
“As such, I believe the central bank will still continue to monitor incoming data to see if there is a need to further cut the OPR. And any movement or actions here could be taken as early as the first quarter of next year,” Lee noted.
This, he said, would depend on two key factors which is the strength of domestic demand and to what extent the negotiated reciprocal tariffs policy would have upon the broader local economy.
“We had seen a lot of front loading activities this year, generally. And there could be an effect on exports should these settle down and normalise eventually especially into the next year.
“The major impact would be how the United States and China trade talks eventually resolve over the longer term,” he added.
Meanwhile, AmBank Group’s chief economist Firdaos Rosli said BNM will likely keep the OPR unchanged for the ‘foreseeable future’ pending the absence of any unforeseen developments given that the economy is humming along as expected now.
“After the rate cut in July, monetary transmission has started to take shape with higher loans growth now.
“It will probably be so as well in the fourth quarter. For example the expiry of the electric vehicle (EV) taxes – which may provide a final boost to EV car sales which will give a boost to loans growth in the final quarter,” Firdaos told StarBiz.
Since monetary policy transmissions will usually take a few months to materialise and impact the real economy, he suggested the economic impact may need more time to be assessed before the monetary authorities could take any further action, if any.
“The July cut was a pre-emptive move - if so, this is level is meant to stay longer since it was pre-emptive move. So the rate cut earlier in July is to guarantee growth at a range as stipulated by the government will be a reality,” Firdaos said.
“Also, the labour market is still okay, and inflation is still subdued due to lack of demand drivers - as such it is more prudent to keep OPR at the current rate until and unless we see some headwinds that may surface in the economy later on. In fact trade also strongly rebounded in September,” he added.
According to the latest advance estimates released by the Statistics Department, Malaysia’s real GDP expanded by a stronger-than-expected 5.2% year-on-year (y-o-y) in the third quarter of 2025, reaching RM442.2bil.
TA Research commented that this marks a notable acceleration from 4.4% y-o-y in the previous quarter and represents the fastest pace of growth since the third quarter of 2024 that’s underpinned by resilient domestic demand and a gradual recovery in external trade.
“As the year comes to a close, Malaysia’s economy has shown strong resilience despite global uncertainties.
“Growth this year was supported by robust domestic demand, steady job creation, improving consumer confidence, and targeted policies to assist vulnerable groups.
“Solid household spending, manageable inflation, and rising incomes helped sustain momentum, while improved sentiment also encouraged private investment — reinforcing Malaysia’s growth trajectory amid a challenging global environment,” TA Research said.
The research house was upbeat on growth next year as well, anticipating strength to sustain despite a more cautious environment by lower official forecasts on some fronts.
“Looking ahead, we maintain our upbeat outlook for 2026, with a high likelihood of revising our 2025 forecast upward from 4.4% should domestic and external conditions remain supportive.
“Growth prospects are expected to be underpinned by a recovery in external demand, alongside continued domestic strength driven by an improving labour market, rising disposable incomes, and firmer consumer confidence,” it said.
“For 2026, we project GDP growth in the range of 4.5% to 5%, faster than the Finance Ministry’s forecast of 4% to 4.5% and the International Monetary Fund’s estimate of 4%,” the research house said.
