UOB notes that the central bank of Malaysia, Bank Negara Malaysia (BNM) is expected to keep the Overnight Policy Rate at 2.75% through early 2027. The central bank emphasises data dependence, monitoring geopolitical spillovers and US policy shifts, while relying on resilient domestic demand, moderate inflation and sound financial markets to anchor the Malaysian Ringgit (MYR).

BNM holds OPR and monitors risks

"Amid generally resilient domestic demand, which is expected to support GDP growth near its potential rate in 2026, a moderate inflation outlook, and broadly favourable financial market conditions, we expect BNM to keep the Overnight Policy Rate (OPR) unchanged at 2.75% for now. The central bank indicates that they will continue to closely monitor external risks and potential geopolitical spillover effects, particularly their impact on domestic demand and inflation."

"BNM also reiterated its commitment in balancing sustainable growth and price stability, with policy decisions remaining firmly data-dependent. It anticipates domestic demand resilience to offset external headwinds, and underscored that Malaysia is facing the conflict from a position of strength – namely robust domestic demand, moderate inflation, sound financial sector and as a net energy exporter which provides some buffer."

"The central bank anticipates domestic financial markets to remain broadly favourable, supported by the country’s strong fundamentals and accommodative global financial conditions. Bond yields are expected to be stable, partly aided by foreign inflows, while equity markets will benefit from improving investor confidence on Malaysia’s fundamentals."

"While downside risks stem mainly from external developments, including shifts in US monetary policy, corrections in AI-linked equities, and geopolitical volatility; but spillovers to domestic conditions are expected to be manageable due to Malaysia’s deep investor base and well-capitalised banks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)