Bank Negara Malaysia (BNM) has kept the Overnight Policy Rate (OPR) unchanged at 2.75%, maintaining its accommodative monetary policy stance as the central bank balances resilient domestic economic growth against lingering geopolitical and global financial risks.
Following its Monetary Policy Committee (MPC) meeting, the central bank said the current policy rate remains appropriate to support sustainable economic growth while ensuring price stability, amid continued uncertainty surrounding the conflict in the Middle East.
The decision marks another pause in the policy rate, with the MPC concluding that inflation remains broadly contained while Malaysia’s economic fundamentals continue to provide resilience against external shocks.
“The MPC considers the monetary policy stance to be appropriate and consistent with the outlook of continued price stability and sustainable economic growth,” BNM Governor Dato Adbul Rasheed said in the policy statement.
Economy remains resilient
The governor said the recent economic indicators point to resilient growth during the second quarter of 2026, underpinned by sustained domestic demand and stronger-than-expected export performance.
The central bank expects Malaysia’s economy to expand firmly within its previously projected 4% to 5% growth range this year.
Household spending is expected to remain supported by continued employment growth, rising wages and various government policy measures.
Investment activity is also expected to remain robust, driven by the implementation of multi-year public and private sector projects, continued execution of approved investments and the rollout of national economic master plans.
Externally, BNM expects stronger global demand for electrical and electronics (E&E) products, together with a recovery in non-E&E exports and sustained tourism spending, to further support economic growth.
Middle East conflict remains key risk
While maintaining an optimistic outlook, the central bank acknowledged that geopolitical developments continue to pose significant risks.
It said ongoing uncertainties surrounding the Middle East conflict could affect both Malaysia’s growth and inflation outlook through higher commodity prices and renewed disruptions to global supply chains.
However, BNM noted that a sustained de-escalation of the conflict would improve global supply chain conditions and ease pressure on commodity prices, providing further support to global and domestic growth.
Beyond geopolitical tensions, downside risks include tighter global financial conditions and concerns over elevated asset valuations in international financial markets.
On the upside, stronger technology-related investments globally, faster improvements in supply chains and pro-growth policies in major economies could further strengthen economic activity.
Inflation remains manageable
BNM said inflation has remained broadly in line with expectations despite some initial pass-through from higher global costs.
Headline inflation averaged 1.7% during the first five months of 2026, while core inflation averaged 2.1%.
Although elevated global commodity prices linked to geopolitical tensions are expected to place upward pressure on prices, the central bank believes the impact on domestic inflation will remain limited.
It attributed this to domestic policy measures and stable demand conditions, which should help cushion the transmission of higher imported costs into consumer prices.
No immediate policy shift expected
Looking ahead, BNM signalled that monetary policy is likely to remain data dependent as it continues monitoring developments affecting both inflation and growth.
The MPC said it will remain vigilant and continue assessing the balance of risks surrounding the domestic economy, suggesting that any future policy adjustments will depend on evolving global and domestic conditions rather than predetermined policy actions.
For now, the central bank believes Malaysia’s strong economic fundamentals, healthy labour market, resilient domestic demand and improving export outlook provide sufficient support for growth while allowing inflation to remain under control.
