KUALA LUMPUR — Bank Negara Malaysia (BNM) is likely to keep the Overnight Policy Rate (OPR) at 3% through 2025, said BMI Country Risk & Industry Research (BMI), a unit of Fitch Solutions Group Ltd.
In a note, BMI said BNM held the OPR at 3% for the 11th consecutive meeting at its second policy meeting of 2025, yesterday, in line with consensus expectations.
It added that the central bank’s latest policy statement was largely unchanged from the previous one, particularly in its forward guidance.
BMI noted that, as expected, headline inflation remained steady at 1.7% year-on-year (y-o-y) in January. Meanwhile, core inflation edged up to 1.8% y-o-y from 1.7% in December 2024.
“Not only did the latest readings stay comfortably below Malaysia’s 10-year average of 2.0%, but they also reinforce the view that inflation remains benign enough for the central bank to hold rates,” BMI said.
Unlike in previous statements, BNM acknowledged that the phased 15% salary adjustment for civil servants, of which 8% took effect in December 2024 (Phase 1), would have little impact on inflation.
This supports BMI’s projection that inflation will likely rise to 2.4% in 2025 from 1.8% in 2024, driven by the planned removal of blanket RON95 petrol subsidies in the second half (H2) of the year, though details remain scarce.
On the economic front, BNM expressed renewed confidence that the momentum seen in 2024 will be sustained in 2025.
“However, it highlighted downside risks from an ‘economic slowdown in major trading partners following significant uncertainties surrounding trade policies’ — a concern absent from previous statements.
“We attribute this to the potential imposition of trade tariffs under a second Donald Trump presidency,” BMI said.
However, until the scale of any protectionist shift becomes clear, BMI continues to forecast robust growth of 4.7% in 2025, a slowdown from 5.1% in 2024 but broadly in line with Malaysia’s recent average of 4.8% between 2015 and 2019.
“This suggests the central bank is in no rush to cut rates to support growth and can instead preserve policy space, intervening only in response to a negative economic shock,” BMI added. – March 7, 2025