Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75% reflects growing confidence in the country’s economic resilience while inflation remains well contained, with the central bank expected to keep rates unchanged through the rest of 2026, according to Kenanga Research.
The research house said the Monetary Policy Committee’s (MPC) latest decision was in line with market expectations and Bloomberg consensus, with policymakers reiterating that the current monetary policy stance remains appropriate to support sustainable economic growth and price stability.
BNM More Optimistic on Growth
Kenanga noted that BNM adopted a more constructive tone on Malaysia’s economic outlook, particularly regarding external demand.
In its latest policy statement, the central bank said global economic growth is expected to remain “broadly resilient”, an improvement from its previous assessment in May, when it warned that global momentum was beginning to weaken.
The stronger outlook is supported by easing supply chain disruptions, softer commodity prices and improving global supply conditions.
On the domestic front, BNM expects Malaysia’s economy to record resilient growth in the second quarter of 2026, underpinned by stronger-than-expected export performance.
While electrical and electronics (E&E) exports remain a key growth driver, the central bank also highlighted a recovery in non-E&E exports alongside improving tourism activity.
BNM maintained its official 2026 GDP growth forecast of between 4.0% and 5.0%, a range that Kenanga described as more optimistic than the Ministry of Finance’s projection of 4.0% to 4.5%.
Inflation Remains Under Control
The research house said inflation continues to remain broadly stable despite initial signs of higher global cost pressures filtering into the domestic economy.
Although the MPC acknowledged some early pass-through from rising global costs, it maintained that inflation is expected to remain manageable throughout 2026, supported by targeted government measures and stable domestic demand that continue to limit broader price pressures.
Risks Remain Balanced
Kenanga said BNM’s latest statement presents a more balanced assessment of risks facing the economy.
Downside risks continue to include prolonged geopolitical tensions, tighter global financial conditions and elevated financial market valuations.
However, the central bank also recognised several upside risks, including faster improvements in global supply chains, stronger technology demand worldwide and more supportive economic policies in major economies.
Kenanga Sees No Rate Cuts This Year
Kenanga maintained its view that BNM will leave the OPR unchanged at 2.75% throughout 2026, arguing that the current policy setting appropriately balances stronger economic growth against manageable inflation risks.
The research house recently revised its 2026 GDP growth forecast to a range of 4.5% to 5.0%, from an earlier estimate of 4.5%, citing stronger manufacturing activity in the first half of the year, supported by front-loaded inventory accumulation, higher mining output and firmer commodity prices.
Looking ahead, Kenanga expects Malaysia’s growth to become increasingly driven by domestic demand, with private consumption supported by a stable labour market, steady wage growth and continued targeted government assistance.
Investment activity is also expected to remain robust, underpinned by the implementation of previously approved multi-year development projects.
