Bank Negara Malaysia (BNM) is expected to keep the Overnight Policy Rate (OPR) unchanged at 2.75% for the rest of 2026, as stronger economic growth and manageable inflation leave little urgency for further policy adjustment, according to Kenanga Research.
BNM’s Monetary Policy Committee (MPC) maintained the OPR at 2.75% at its September meeting, in line with Kenanga’s house view and market consensus.
The central bank said the current monetary policy stance remained “consistent with the outlook of continued price stability and sustainable economic growth”, while retaining its data-dependent approach.
The MPC also reiterated that it would “remain vigilant to ongoing developments and assess the balance of risks surrounding the outlook for domestic inflation and growth”.
Kenanga said the latest statement reinforces its view that BNM remains comfortable keeping monetary policy unchanged, particularly after the central bank upgraded its assessment of Malaysia’s economic growth.
BNM now expects the Malaysian economy to expand by around 5.0% in 2026, an upgrade from its previous guidance that growth would be “firmly within the 4.0%-5.0% range”.
Kenanga said the revision signals greater confidence in the domestic economy and is above the Ministry of Finance’s growth forecast of between 4.0% and 4.5%.
For 2027, BNM expects growth to remain resilient, supported by electrical and electronics (E&E) exports, continued strength in technology-related non-E&E shipments, sustained tourism expenditure, stable labour market conditions and ongoing investment activity.
Globally, the central bank also adopted a more constructive assessment, pointing to strong technology-sector expansion, improving supply conditions and stable labour markets.
Sustained technology-related spending is expected to cushion some of the impact from ongoing geopolitical uncertainties.
Kenanga’s own outlook is slightly more bullish, with the research house forecasting Malaysia’s GDP to expand 5.3% in 2026, compared with 5.2% in 2025.
It attributed the forecast to stronger-than-expected economic performance in the first half of the year, supported by net exports and resilient domestic demand.
Inflation, meanwhile, remains well contained despite elevated external costs and stronger economic activity.
Headline inflation averaged 1.8% during the first seven months of 2026, while core inflation averaged 2.0%.
BNM observed limited pass-through of higher costs to consumer prices, supported by domestic policy measures, stable demand conditions and limited spillovers from export-led growth into wages.
Kenanga noted that July headline inflation of 1.8% remained well below levels that would warrant monetary policy tightening.
However, the central bank continues to see upside risks to domestic costs from the Middle East conflict, particularly if elevated global commodity prices persist.
BNM maintained a broadly balanced assessment of risks surrounding the economic outlook.
Downside risks include prolonged geopolitical tensions, tighter global financial conditions and elevated financial market valuations.
Domestically, an extended Middle East conflict and weaker commodity production could weigh on Malaysia’s growth.
On the upside, stronger technology-related export demand, better-than-expected global growth, higher tourism activity, a faster recovery in global supply chains and pro-growth policies in major economies could lift economic activity beyond current expectations.
Against this backdrop, Kenanga said the existing 2.75% OPR strikes an appropriate balance between firmer growth momentum and emerging external cost pressures.
“With growth now assessed at around 5.0% in 2026 and inflation well below levels that would warrant tightening, there is limited urgency for further policy adjustment,” the research house said.
Kenanga therefore expects BNM to remain on hold for the rest of the year, with Malaysia’s growth fundamentals staying favourable despite continued uncertainty surrounding geopolitical developments and the global economy.
