PETALING JAYA: Bank Negara Malaysia (BNM) will likely raise interest rates next year, as resilient economic growth and emerging inflationary pressures pave the way for gradual monetary policy normalisation.
However, the timing of the overnight policy rate (OPR) adjustment could vary, with some economists anticipating a 25-basis-point (bps) hike to 3% in the first half of financial year 2027 (1H27).
The forecasts followed BNM’s decision last week to keep the OPR unchanged at 2.75% at its sixth and final Monetary Policy Committee (MPC) meeting of the year, in line with market expectations.
CGS International (CGSI) Research, for one, expects BNM to raise the benchmark rate by 25bps in 1H27, citing stronger household incomes, fiscal support and potential external inflationary risks.
“As we expect 2026 gross domestic product (GDP) growth at 5.5% and growth to remain resilient into 2027, we believe BNM has sufficient policy space to gradually normalise rates should inflation risks become more pronounced,” the brokerage said.
“A 25bps hike in 1H27 would allow BNM to stay ahead of potential demand-side inflation pressures arising from stronger income growth and fiscal support measures,” CGSI Research added.
Hong Leong Investment Bank Research also maintained its forecast for a 25bps OPR hike to 3% in 1H27, provided downside risks to economic growth ease and inflationary pressures become more widespread.
It viewed the November MPC statement as broadly neutral, with a slight upgrade in the 2026 growth outlook, but said contained inflation and lingering growth risks should allow the central bank to remain patient in the near term.
Phillip Capital Research also reiterated its forecast for a 25bps increase in OPR in 1H27, followed by an extended hold for the rest of the year.
“With BNM expecting inflation to edge higher in 2027, alongside resilient economic growth, we believe these conditions could give BNM more room to raise the OPR in the near term to contain inflationary pressures,” it said.
“Furthermore, with banking system loan growth outpacing deposit growth in recent quarters, a higher OPR could encourage higher deposit growth by making bank deposits more attractive,” it added.
TA Research sees the possibility of a 25bps OPR hike to 3% in the first quarter of 2027 (1Q27), potentially at the January or March policy meeting.
“The 1Q27 could provide a suitable window for policy normalisation, supported by resilient economic growth and expectations of higher inflation,” it argued.
It expects headline inflation to increase from 1.9% this year to 2.2% in 2027, strengthening the case for a modest adjustment, although manageable price pressures or heightened external uncertainties could delay the move.
Kenanga Research also expects a 25bps hike in OPR in 1Q27, followed by an extended hold throughout the year.
It said a modest rate adjustment would help prevent widening interest rate differentials from putting pressure on the ringgit, while offsetting the erosion of the real OPR from higher inflation.
The research house expects Malaysia’s GDP to expand 5.3% this year and 5% in 2027, supported by domestic demand, investment in artificial intelligence and digital infrastructure, and tourism.
Apex Securities, meanwhile, expects the OPR hike to happen in January 2027, from its previous forecast of 2Q27.
It said stronger-than-expected economic growth, easing concerns over geopolitical supply constraints and greater attention to inflationary risks had strengthened the case for earlier policy normalisation.
“We see little reason for BNM to wait as the key hurdle for a hike has eased,” it said, adding that potential cost pass-through to consumers could prompt BNM to act earlier to contain second-round inflationary effects.
One analyst told StarBiz he expects the central bank to turn hawkish in the near term, thanks to domestic demand resilience, although external uncertainties and global financial conditions continued to shape the broader outlook.
“We see possibility of a rate hike in 1H27, although such decisions will hinge on how the broader economy perform amid rising cost pressures,” he said.
