PETALING JAYA: Bank Negara Malaysia (BNM) has opted for continuity by keeping the Overnight Policy Rate (OPR) at 2.75%, a move economists say should help maintain stability for borrowers and businesses facing persistent global headwinds.
Bank Islam Malaysia Bhd chief economist Imran Nurginias Ibrahim said the unchanged rate provides a degree of certainty for the market.
“With borrowing costs remaining unchanged, households and firms are able to plan their financial commitments with greater certainty.
“Stable financing conditions are particularly important for sectors such as housing and small and medium-sized enterprises, where loan costs play a significant role in investment and spending decisions,” he told SunBiz.
He said the steady policy rate should continue to support domestic consumption, which remains a key driver of Malaysia’s economic growth.
“When interest rates are stable, households face fewer pressures from rising loan repayments, allowing them to maintain spending on goods and services. This helps sustain overall economic momentum and reinforces confidence among consumers.”
For businesses and investors, Imran Nurginias said the unchanged OPR signals a predictable monetary policy environment.
He said policy stability reduces uncertainty and encourages firms to proceed with investment plans, particularly in capacity expansion and productivity improvements.
“In this context, the current policy stance supports a balanced economic environment where growth can continue while inflationary pressures remain contained.”
MBSB Research chief economist Abdul Mui’zz Morhalim said the decision to keep the OPR unchanged ensures that the current monetary policy setting remains supportive of economic growth.
“With inflation remaining stable and manageable, there is no urgent pressure for BNM to adjust the OPR.”
As an open economy, he said, Malaysia’s growth outlook remains susceptible to downside risks from external developments.
“Despite escalating tensions in the Middle East, the extent of the impact on the domestic economy remains uncertain. “Malaysia may benefit from higher oil prices; however, if the conflict significantly weakens global demand, BNM still has room to ease the OPR to support economic activity,” he added.
Center for Market Education CEO Carmelo Ferlito said BNM’s decision to maintain the OPR at 2.75% is broadly understandable in the current Malaysian context, as inflation remains relatively contained and domestic growth, while moderating, does not yet justify abrupt monetary intervention.
“From my perspective, however, the most important point is that the OPR should not be interpreted as a tool to actively stimulate growth, but rather as an administered reference that should avoid creating further distortions in the structure of production.”
Ferlito said interest rates are not merely the “cost of money”; they are signals that coordinate saving, investment and intertemporal decisions across the economy.
“When policy rates are pushed too far away from underlying market conditions, they risk encouraging malinvestment, excessive leverage and artificial sectoral expansion.”
He added that Malaysia has so far avoided the extreme monetary accommodation seen in some Western economies after the pandemic, which partly explains why inflation here has remained more moderate.
“In that sense, keeping the OPR unchanged reflects a degree of prudence: tightening further could unnecessarily weaken investment sentiment, while premature loosening could send misleading signals to capital markets,” Ferlito said.
Monetary policy should remain cautious, noting that inflation does not originate simply from rising prices themselves but often reflects earlier monetary or fiscal accommodation, he added.
“Therefore, the role of BNM should primarily be to preserve monetary stability and allow market rates to reflect real saving conditions as much as possible, rather than attempting to fine-tune growth through aggressive rate adjustments,” Ferlito said.
University of Malaya senior lecturer Dr Aidil Rizal Shahrin said the OPR at 2.75% suggests that economic growth remains on the right trajectory.
He said both core and headline inflation are currently mild at 2.3% and 1.6%, respectively.
“The impact of the US tariffs is not that significant. Still uncertain with the current ruling of the Supreme Court.”
However, Aidil Rizal said uncertainty remains due to the war in the Middle East, which could affect oil and liquefied natural gas prices.
“Further impact of the war is still uncertain. Two things about the war are important: whether it will escalate and how long it will last.”
He added that Malaysia’s economy could benefit more from higher prices for both commodities than in 1970, when the surge in crude oil prices led to the country’s highest inflation ever.
Economist Geoffrey Williams said that, based on BNM’s mandate, inflation remains low, the economy is growing well and the financial system is sound.
He said uncertainty arising from the conflict in the Middle East is creating volatility, but this is precisely why the central bank is keeping interest rates steady. “It is not good policy to change rates in uncertain times because it just adds to the uncertainty and makes life more difficult.”
BNM’s Monetary Policy Committee (MPC) decided to maintain the OPR at 2.75% at its meeting today.
In a statement, the MPC said building on the strengths of 2025, global growth would continue to be supported by sustained domestic demand, moderating inflation, robust tech investments and supportive fiscal and monetary policies.
However, the committee also said the conflict in the Middle East has raised uncertainty in the global economy.
“The impact on the global economy will depend on the length and severity of the conflict,” it said.
In light of recent developments, the MPC said, downside risks have risen, arising from further escalation in geopolitical tensions and heightened volatility in global financial markets.
“Additionally, there are continued concerns over potentially higher tariffs and elevated valuations in financial markets,” it said.
The MPC said upside potential includes stronger technology spending, a milder impact of tariffs on economic activity and pro-growth policy measures in key economies.
Malaysia’s economy grew by 5.2% in 2025, driven by strong domestic demand, higher electrical and electronics (E&E) exports and robust inbound tourism.
“This growth momentum is expected to continue in 2026, anchored by resilient domestic demand,” it said.
The MPC said employment, wage growth and policy measures will remain supportive of household spending.
“Investment activity will be driven by the progress of multi-year projects in both the private and public sectors, implementation of new, smaller-scale public projects, continued high realisation of approved investments, as well as the ongoing implementation of national master plans.”
The committee said the external sector will benefit from continued strength in E&E exports and higher tourist spending.
But this growth outlook remains subject to uncertainties surrounding global developments, including the conflict in the Middle East.
“Downside risks remain from slower global trade and lower-than-expected commodity production. Upside potential to growth could arise from a better global growth outlook, stronger demand for E&E goods and more robust tourism activity.”
The MPC said headline inflation in 2026 is expected to remain moderate. “While global commodity prices may be subject to greater volatility given recent developments, the impact on domestic inflation is expected to be contained.”
Core inflation, meanwhile, is expected to remain stable and close to its long-term average, reflecting continued expansion in economic activity and the absence of excessive demand pressures.
“The MPC acknowledges the uncertainties from the ongoing conflict in the Middle East. The impact on the global and Malaysian economy will depend on how these developments evolve.”
It said the Malaysian economy is facing these challenges from a position of strength, with robust domestic growth, moderate inflation, a sound financial sector and a resilient external position.
The Sun Malaysia
