At its first meeting of 2025, the Bank Negara Malaysia (BNM) held its overnight policy rate (OPR) at 3.00% for the tenth consecutive meeting, in line with what BMI said it had expected.
The latest policy statement was relatively similar to the last, particularly concerning forward guidance. The house said it expects the Bank to leave the OPR on hold at 3.00% through 2025. In line with expectations, headline inflation edged lower to 1.7% y-o-y in December 2024, from 1.8% in November. Not only did the latest reading reaffirm the full-year forecast for inflation to average 1.8% in 2024, but it also remained comfortably below Malaysia’s 10-year average of 2.0%.
Looking ahead, BMI said inflation should average 2.4% in 2025 based on its projections, which considered the planned removal of blanket RON95 petrol subsidies in H2 2025 but details of which remain scant it noted. The silver lining is the house thinks that oil prices should remain relatively contained this year. Indeed, the Oil and Gas team forecasts a 5.0% decrease in average crude oil prices to USD76/bbl in 2025 and is consistent with headline inflation remaining below 2.0%. And the Bank is aligned on this, stating that “global commodity prices are expected to continue to trend lower, contributing to modest cost conditions in the near term”.
BMI said BNM has less to worry about on the economic front, having expressed its renewed confidence that the economic momentum witnessed in 2024 will be sustained in 2025.
However, it highlighted downside risks to growth amid “heightened risks of trade and investment restrictions” – a phrase that was notably absent from previous statements. BMI attributes this to the potential imposition of trade tariffs under a second Trump presidency. But until the nature of the protectionist shift becomes clear, the house did continue to forecast a relatively robust growth of 4.7% in 2025 – a slight slowdown from an estimated 5.0% in 2024, which means the Bank will not be in a hurry to cut to support the economy.
