- Decision
- Lower
- Rate change
- 25 bps
- overnight policy rate
- 2.75%
Bank Negara Malaysia’s Monetary Policy Committee cut the Overnight Policy Rate by 25 bp to 2.75 percent, simultaneously trimming the corridor to 3.00–2.50 percent, describing the move as a pre-emptive step to safeguard the economy’s “steady growth path” amid moderate inflation and external uncertainties. The OPR had been kept unchanged at 3.00 percent from January through May 2025 before this reduction. The committee indicated the new corridor will guide money-market rates in line with the easier stance. Headline and core inflation averaged just 1.4 percent and 1.9 percent, respectively, in the first five months, and full-year inflation is projected to stay moderate given contained global cost pressures and the absence of excess demand; Q2 activity continued to expand on resilient domestic demand, firm employment and wages, ongoing multi-year investment projects and solid exports, though overall growth risks remain tilted to the downside from weaker global trade and commodity output. The ringgit is expected to be driven mainly by external factors, with supportive domestic reforms and initiatives offering some offset, while tariff uncertainty and geopolitical tensions could inject financial-market and commodity-price volatility. The committee said it will remain vigilant and keep assessing risks to growth and inflation.
Rate evolution
Bank Negara Malaysia cut the Overnight Policy Rate by 25 basis points to 2.75% in July 2025 and then held it there through September 2026, pairing a pre-emptive easing with an extended pause. The July cut was framed as a step to preserve steady growth as tariff and geopolitical uncertainties threatened the external outlook, even though the domestic economy was on a strong footing and both headline and core inflation were moderate amid contained cost conditions and no excessive demand pressures. Subsequent decisions judged 2.75% appropriate and supportive as trade uncertainty initially eased somewhat and Malaysia’s economy remained resilient, with domestic demand, investment, employment and wages, alongside electrical and electronics exports and tourism, sustaining growth while inflation stayed moderate and core inflation remained close to its long-term average.
From July to September 2026, the risk narrative turned more cautious as the Middle East conflict raised uncertainty, tightened global financial conditions, lifted energy and commodity prices and caused supply disruptions, but the Monetary Policy Committee continued to hold the Overnight Policy Rate at 2.75%, including on 3 September, as it judged the stance consistent with continued price stability and sustainable growth. Bank Negara Malaysia said the economy expanded by 5.7% in the first half of 2026, driven by stronger-than-expected exports and sustained domestic demand, and expected the momentum to bring full-year growth to around 5%, supported by electrical and electronics and technology-related non-electrical and electronics exports, tourist spending, stable labour market conditions and ongoing investment. Headline and core inflation averaged 1.8% and 2% respectively in the first seven months, with the pass-through of elevated costs contained by domestic policy measures, stable demand conditions and limited wage spillovers, although the Committee remained vigilant to cost pressures and domestic demand conditions amid uncertainty surrounding the Middle East conflict.