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Malaysia Monetary Policy September 2024

Malaysia: Bank Negara Malaysia extends pause in September

Latest bank decision: At its meeting on 4–5 September, the Monetary Policy Committee of Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.00%, as had been widely expected.

Monetary policy drivers: The key domestic factor influencing the Central Bank’s decision was subdued inflation, with both the headline and core rates averaging 1.8% in the first half of 2024. Additionally, the BNM expects both headline and core inflation to come in below 3.0% for the year as a whole. Meanwhile, the Malaysian economy expanded robustly in H1, and the BNM sees risks to growth as broadly balanced. The Bank was also upbeat about the ringgit’s trajectory following its recent appreciation.

Policy outlook: The Bank did not provide explicit forward guidance but stated that it “remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth trajectories going into 2025”. Our panel overwhelmingly expects Malaysia’s interest rates to remain unchanged in 2024 as a whole, in contrast to regional peers that have either begun cutting rates or have opened the door for some monetary policy loosening. The BNM’s last meeting this year is scheduled for 5–6 November.

Panelist insight: United Overseas Bank analysts Julia Goh and Loke Siew Ting commented on the outlook:

“With a balanced outlook and neutral bias, we maintain our view of a stable OPR at 3.00% for 4Q24 and 2025. We believe that BNM will continue to guard against the second-round effects of robust domestic demand and favorable labor market conditions on inflation over the coming quarters. While more central banks embark on an easing cycle, a stable OPR will provide support for [the ringgit].”

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