PETALING JAYA: Bank Negara Malaysia (BNM) has kept the overnight policy rate (OPR) unchanged at 2.75% at its final Monetary Policy Committee (MPC) meeting of the year, in line with most economists’ expectations.
In a statement released yesterday, the central bank said the current monetary policy stance remained consistent with the outlook for continued price stability and sustainable economic growth.
BNM said recent indicators pointed to continued strength in Malaysia’s economic growth in the third quarter of 2026, supported by strong export performance and sustained domestic demand.
Looking ahead, the central bank expects the economy to remain resilient in 2027, supported by sound economic fundamentals. The external sector is expected to remain a major growth driver, underpinned by the ongoing global technology upcycle and firm tourist spending.
Domestic demand will continue to benefit from stable labour market conditions, ongoing investment activity and measures introduced under Budget 2027 to support private consumption.
However, the central bank cautioned that the country’s growth outlook remained exposed to external uncertainties.
“This growth outlook remains subject to downside risks from a prolonged conflict in the Middle East and lower commodity production.
“Upside potential to growth could arise from better-than-expected global growth, stronger technology-related export de- mand as well as higher tourism activity,” the central bank also stated.
On the global front, BNM noted that inflation had risen amid higher energy costs, which are expected to remain elevated.
It said geopolitical uncertainties would continue to weigh on global growth amid persistent inflationary pressures, although sustained technology-related spending and adjustments to supply constraints could cushion the impact.
“Downside risks to global growth remain, stemming from prolonged geopolitical tensions as well as tighter global financial conditions from monetary policy adjustments, concerns over valuations in financial markets and fiscal vulnerabilities.
“Upside potential could come from stronger technology spending and a faster-than-expected recovery in supply chain conditions,” it said.
Meanwhile, OCBC Research senior Asean and India economist Lavanya Venkateswaran said that the central bank’s decision to maintain the OPR at 2.75% was in line with consensus and the research house’s expectations.
She said BNM’s monetary policy stance was largely unchanged from its previous meeting, leaving room for an eventual normalisation of interest rates.
The assessment of economic growth remained strong, while inflation was expected to increase modestly into 2027.
“The explicit mention of Budget 2027 as a supportive factor points to more broad-based support for economic growth,” she said in a report.
Lavanya noted BNM’s expectations that headline and core inflation would edge higher next year, reflecting geopolitical developments, elevated global commodity prices and adverse weather conditions.
However, inflationary pressures are expected to remain manageable, supported by domestic policy measures and stable demand conditions.
“Similar to BNM, we forecast headline consumer price index to average 2.1% in 2027, from 1.9% in 2026,” she said.
Lavanya maintained her expectation that the central bank would increase the OPR by 25 basis points to 3% at its next MPC meeting on Jan 21, 2027.
“However, the combination of resilient growth and a modest pick-up in inflation still gives BNM space to normalise the policy rate back to 3%, reducing the need to maintain a slightly accommodative policy stance.
“We reiterate our long-held view that BNM will normalise its policy rate to 3% at its Jan 21 meeting,” she said.
Nevertheless, Lavanya said the main risk to OCBC’s forecast was that BNM could choose to extend its assessment period before deciding whether to normalise monetary policy.
