After BNM's hold at 3%, economists forecast no OPR change throughout 2025

• This marks the eleventh consecutive MPC meeting where the OPR was held at 3%, after a 25-basis-point increase from 2.75% in May 2023.

KUALA LUMPUR (March 6): Following Bank Negara Malaysia’s (BNM) decision to maintain the overnight policy rate (OPR) at 3% on Thursday, economists project that the interest rate will remain unchanged for the rest of the year.

BNM kept the OPR unchanged on Thursday after the Monetary Policy Committee (MPC) concluded its meeting, aligning with economists' expectations surveyed by Bloomberg. Before the announcement, a Bloomberg poll of 23 economists predicted the central bank would maintain the benchmark interest rate to preserve policy flexibility amid potential impacts from new US tariffs. 

This marks the eleventh consecutive MPC meeting where the OPR was held at 3%, after a 25-basis-point increase from 2.75% in May 2023.

RHB Research believes BNM will continue to hold the key rate throughout 2025, based on stable economic prospects and manageable inflation. 

RHB Research, which maintained its economic growth forecast of 5% for Malaysia this year, expects first-quarter growth to range between 4.9% and 5%, driven by increased consumer spending and investment, as well as continued expansion in trade and manufacturing activities.

Anticipating inflation to stay subdued, it also maintained its forecast at 2.4% this year, within the official forecast range of 2% to 3.5%.

But RHB Research remains wary about potential downside risks from external factors, namely the uncertain future of tariff policies and the broader impact of global supply chain disruptions and inflationary pressures.

“While Malaysia's export sectors are somewhat insulated from direct US protectionism — due to the relatively low US trade deficit with Malaysia — the indirect effects, especially through key trade partners like China, could still be significant,” it said. “The escalation of tariff tensions among major economies could add further downside risks, as US protectionist policies may trigger similar actions from other countries, including China."

Subsidy rationalisation, rising costs due to wage policies could add to price pressures

UOB Global Economics & Markets Research also sees no reason for BNM to adjust the OPR, unless external uncertainties surrounding trade and tariff policies lead to a shock to the global and Malaysian economy.

But it flagged upside risks to inflation from RON95 fuel subsidy rationalisation measures. Other subsidy rationalisation measures to watch for include prices of white rice, sugar, and cooking oil, as well as upward adjustments in electricity tariffs in the second half of this year.

Rising operating costs due to higher minimum wages, a multi-tier foreign worker levy, and mandatory Employee Provident Fund (EPF) contributions for foreign workers could add to price pressures, the research firm added.

The extent to which these cost increases translate into consumer prices will depend on demand strength, adding that moderate consumer spending could help cap pass-through effects to consumer prices.

Near-term volatility likely for ringgit, outlook improves in 2H2025

On the currency front, RHB Research said near-term fluctuations in the ringgit are expected as global investor sentiment remains cautious due to tariff tensions, geopolitical developments, and the US Federal Reserve’s easing cycle.

“We anticipate that the ringgit will show signs of consolidation in the second half [of] this year [2H2025], supported by improvements in fiscal and current account balances, as well as a narrowing interest rate differential between the US dollar and ringgit,” RHB Research added.

MIDF Research said US monetary policy easing is expected to be more gradual than initially projected, keeping interest rate differentials wide in the near term. 

However, the eventual narrowing of this gap is expected to support emerging market currencies, including the ringgit, said MIDF Research.

It also highlighted that recent developments in the US trade landscape could lead to inflation pressures in the US, potentially slowing down the Federal Reserve’s rate cut cycle.

Planning for a new home? Download a copy of EdgeProp’s guide to new launches — with more than 800 upcoming projects inside!