- Decision
- Maintain
- Rate change
- 0 bps
- overnight policy rate
- 2.75%
Bank Negara Malaysia’s Monetary Policy Committee kept the Overnight Policy Rate unchanged at 2.75% at its 4 September meeting, judging the stance appropriate given moderate inflation and a resilient economy expected to grow 4–4.8 percent in 2025 after a 4.4 percent expansion in the first half of the year. The hold follows a 25 bp cut in July that lowered the OPR from 3 percent, the first adjustment since January. Headline and core inflation averaged 1.4 percent and 1.9 percent respectively in the first seven months, with both measures projected to stay moderate through 2026 amid easing global commodity prices and limited demand pressures. Domestic activity should remain underpinned by firm labour market conditions, income-supportive policies and ongoing public and private investment projects, although downside risks stem from weaker global trade, geopolitical tensions and potential tariff escalations, partly offset by possible boosts from favourable US trade outcomes, electronics demand and tourism. The committee pledged to monitor economic and price developments and stands ready to adjust policy as needed to safeguard sustainable growth and price stability.
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.