KUALA LUMPUR, July 7 — Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 2.75 per cent at its Monetary Policy Committee (MPC) meeting, supported by resilient external sector performance, moderate domestic demand and manageable inflationary risks, said economists.

The MPC is scheduled to announce its latest monetary policy decision on Thursday.

External resilience supports the status quo

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the current policy rate remains appropriate following last year’s pre-emptive easing to cushion the impact of external shocks. 

“Malaysia’s well-diversified external sector has really contributed to the resilience of the economy,” he told Bernama. 

He noted that exports grew at a robust 45.3 per cent year-on-year in May 2026, underpinned by 70.5 per cent growth in the electrical and electronic sector, while liquefied natural gas exports jumped 111 per cent. 

He added that stronger exports of information and communication technology services widened the services account surplus, contributing to the current account surplus, which increased to 3.0 per cent of gross domestic product in the first quarter (1Q) of 2026. 

However, Mohd Afzanizam said private consumption grew by 4.7 per cent in 1Q 2026, below its historical average growth of 6.0 per cent, while the unemployment rate edged up to 3.0 per cent in April from 2.9 per cent previously. 

“Keeping the OPR steady is a strategic imperative to allow the Malaysian economy to grow at a respectable rate in the second half (2H) of 2026,” he said. 

Limited case for a rate hike

IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said there is currently no urgency for BNM to adjust monetary policy unless major central banks, including the US Federal Reserve (US Fed), Bank of Japan, European Central Bank or People’s Bank of China, make cumulative interest rate changes exceeding 0.5 per cent.

He said the threshold for an OPR hike remains high, saying higher energy prices stemming from geopolitical tensions would likely result in supply-driven rather than demand-driven inflation.

“BNM is more likely to look through temporary energy price shocks while assessing their impact on underlying inflation and economic growth,” he said, adding that the OPR is likely to remain at 2.75 per cent for the rest of the year.

He added that should both BNM and the US Fed maintain their policy rates, the ringgit’s performance would largely depend on interest rate differentials and Malaysia’s trade momentum, which would remain supportive in 2H 2026.

Potential rate hike if growth exceeds expectations

Juwai IQI co-founder and group chief executive officer Kashif Ansari said that while his base case is also for the OPR to remain unchanged throughout 2026, stronger-than-expected economic growth could prompt BNM to raise the benchmark rate by 25 basis points to 3.0 per cent at either its September or November MPC meeting.

He said such a move would likely be driven by stronger-than-expected economic activity or persistently higher oil prices that feed into inflation.

“We still believe that the MPC will leave the policy rate unchanged for the rest of 2026. If they do lift the rate toward the end of the year, that would be a result of an unexpectedly (strong) economic (performance) beyond what most analysts now expect.

“Apart from strong economic growth, the single biggest factor that might cause BNM to raise the rate later in 2026 is the price of oil, because that has a big impact on inflation,” he said. 

He said the conflict in the Gulf pushed energy prices up, which fed through to inflation. 

“Headline inflation reached 2.0 per cent in May, the highest in nearly two years. But if peace in the Gulf holds, then inflation could fade. 

“That would open the door to restoring the subsidised fuel quota, cheaper diesel for businesses and farmers, and lower shipping costs on the goods Malaysia exports and imports,” he said. — Bernama