BNM likely to hold rates throughout this year

PETALING JAYA: Economists continue to expect the overnight policy rate (OPR) to be retained at 2.75% throughout 2026, as the current policy stance remains appropriate in supporting growth while keeping inflation levels manageable.

TA Research said in a report to clients that based on the latest policy statement, it believes Bank Negara Malaysia (BNM) continues to maintain a neutral policy stance.

“The central bank expects global growth to remain broadly resilient, supported by sustained strength in the technology sector, improving supply chain conditions and more favourable commodity prices.

“Moreover, a sustained de-escalation of tensions in the Middle East would provide further support by easing supply disruptions, while stronger technology-related investment and additional pro-growth policies could further lift activity,” it told clients.

“Nevertheless, downside risks remain tilted towards prolonged geopolitical tensions, tighter global financial conditions, elevated asset valuations and rising trade fragmentation.

“Reflecting these uncertainties, the International Monetary Fund recently revised its 2026 global growth forecast slightly lower to 3% from 3.1%, citing the Middle East conflict, rising trade protectionism and the risk of a correction in artificial intelligence-related market expectations,” it added.

TA Research said growth continues to be supported by resilient household spending, a healthy labour market and stronger-than-expected export performance, particularly in the electrical and electronics (E&E) sector amid the ongoing global technology upcycle.

Looking ahead, domestic demand is expected to remain the primary growth driver, supported by steady employment and wage growth, continued progress in private and public investment projects, strong realisation of approved investments and the implementation of national master plans, it added.

TA Research said, meanwhile, the external sector should continue to benefit from sustained E&E demand, a gradual recovery in non-E&E exports and stronger tourism activity.

BNM kept the OPR unchanged at 2.75% last Thursday, extending its pause in raising the rate after a 25-basis-point cut in July last year.

Kenanga Research said the latest statement by the Monetary Policy Committee reflects a modest upgrade to the country’s growth outlook, driven by improved external conditions and stronger exports, alongside contained inflation.

It said even so, these shifts do not warrant a change in policy direction, as risks persist.