KUALA LUMPUR: Research houses view Bank Negara Malaysia’s decision to maintain the overnight policy rate (OPR) at 2.75 per cent as an expected move to close out the year, given the country’s relatively benign inflation environment and stable ringgit.
HSBC senior Asean economist Yun Liu said there was little urgency for the central bank to raise interest rates, particularly as Malaysia continued to record the lowest inflation rate in Asean.
He said the ringgit had also remained relatively stable against the US dollar year-to-date.
This gives Bank Negara greater flexibility to maintain its policy stance compared with regional peers facing stronger currency depreciation pressures.
“The ringgit has little changed from the greenback year-to-date, putting Bank Negara in a more comfortable position to hold than peers whose currencies have seen strong depreciation pressures.
“What’s more, the fiscal discipline in 2027 Budget, albeit with a series of proconsumer measures, reduces the urgency for Bank Negara to hike immediately as a pre-emptive move,” he said.
However, the firm said the central bank’s tone came as a surprise as it sounded less hawkish than in its statement in September.
“One example is Bank Negara’s assessment on the 2027 inflation. It expects both headline and core inflation to ‘edge higher, albeit remaining contained…’
“The phrase of ‘remaining contained’ was removed in the September statement when referring to 2026 inflation, and now it has returned in the 2027 inflation outlook assessment,” Liu said.
The firm expects Bank Negara to deliver a 25 basis point rate hike in the first quarter of 2027, bringing its policy rate back to 3.0 per cebt.
The important distinguisher from peers is that this is likely to be just a one-off policy normalisation move, rather than a fixed hiking cycle, it added.
OCBC senior Asean and India economist Lavanya Venkateswaran said Bank Negara’s decision came in line with consensus and its expectations.
She said the assessment of growth and inflation reflected Bank Negara’s forward-looking expectations for 2027.
“Bank Negara noted that the economy’s sound fundamentals are expected to keep growth resilient in 2027.
“The external sector is expected to remain as a major driver of growth, supported by the ongoing global technology upcycle and firm tourist spending,” she said.
The firm reiterated its long-held view that Bank Negara will normalise its policy rate to 3.0 per cent at its Jan 21 meeting.
“The main risk to our call is that Bank Negara opts for a longer runway to assess the need for normalisation,” she added.