PETALING JAYA: The Monetary Policy Committee’s (MPC) decision to keep the overnight policy rate (OPR) at 2.75% is in line with overall consensus, says Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid.
Speaking to StarBiz, he said the economy performed better than expected last year with gross domestic product (GDP) growth likely to come in at the top range of the official forecast of between 4% and 4.8%.
“In 2026, such growth momentum will likely continue, implying a sense of optimism for this year’s growth,” he told StarBiz.
According to Bank Negara Malaysia (BNM), the strength in global growth was reflected in lowered tariffs, high artificial intelligence (AI)-led tech spending and stronger fiscal support.
It added that even with tariffs weighing on global growth, factors like sustained domestic demand, moderating inflation, robust tech investments and supportive fiscal and monetary policies would keep the outlook resilient.
However, the central bank cautioned that some downside risks remained, including potentially higher tariffs, further escalation in geopolitical tensions and heightened volatility in global financial markets.
“Upside potential includes stronger tech spending, a milder tariff impact on economic activity and pro-growth policies in major economies,” it said in a statement.
On the local front, it said employment, wage growth and income-related policy measures would be supportive of household spending, while multi-year projects including smaller-scale projects will boost investment activity.
Strength in the electrical and electronics exports and higher tourist spending will push growth for the external sector, according to the central bank.
BNM cautioned that the growth outlook could change especially as global developments take place.
On a separate note, headline and core inflation is estimated to remain moderate for the year amid easing in global cost conditions.
To recap, both averaged at 1.4% and 2% respectively last year.
Mohd Afzanizam said the MPC is comfortable with the current inflation trajectory, and most likely sees the prevailing OPR level as appropriate and able to support growth and keep inflation risk at bay.
“In other words, they are likely to keep the OPR steady in the upcoming meeting and perhaps for the rest of the year.
“Our sense is that there is no urgency for BNM to reduce the OPR as the outlook for economic growth is fairly reasonable,” he said.
Furthermore, Mohd Afzanizam said the latest inflation rate showed it is gradually climbing – suggesting that BNM must exercise prudence in keeping inflation risk steady.
“We are maintaining our call that the OPR will be kept unchanged at 2.75% for 2026.”
Similarly, Kenanga Investment Bank Bhd
economist Muhammad Saifuddin Sapuan expected the central bank to maintain the OPR rate for the rest of the year.
“BNM’s decision to hold the OPR steady aligns with our forecast. With GDP growth holding steady and inflation remaining manageable, we continue to see limited scope of policy adjustment, barring unexpected shocks,” he said.
Rakuten Trade head of equity sales Vincent Lau said it was not a surprise that the central bank had kept the OPR rate.
Lau reckoned there would be no change in the next review, which should take place in March.
“In fact we expect no change in the OPR for the year, as the current rate remains supportive of the economy. Then again, with the possible rate cut expected for the United States for the year, there is ample room and more flexibility for BNM to manage.”
BNM said that it would continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation.
