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Malaysia Monetary Policy January 2025

Malaysia: Central Bank stands pat once again in January

Rates remain stable for tenth consecutive meeting: At its meeting on 22 January, the Monetary Policy Committee of Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.00%, marking the tenth consecutive hold since May 2023. The decision matched market expectations.

Tame inflation and robust growth outlook support hold: The BNM noted that the current policy level supports economic growth, with domestic demand remaining resilient thanks to a strong labor market and robust wage growth. Moreover, the Bank assessed that inflation should remain manageable this year as a result of lower commodity prices and contained domestic cost pressures. Regarding the ringgit, the BNM noted that narrowing interest rate differentials between Malaysia and the advanced economies is supporting the currency.

Rates likely to remain stable in the coming years: Absent explicit forward guidance in its press release, the BNM is forecast to keep the policy rate stable until at least 2029. Downside risks to interest rates include weaker-than-expected GDP growth, while protectionist U.S. trade policies and smaller-than-anticipated rate cuts by the U.S. Fed are upside risks.

The BNM will reconvene on 6 March.

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

“We believe that the [BNM] is likely wait for further clarity on US trade and tariff policies, data indicators in the coming months, and further announcements on domestic policy changes to assess the impact on growth and inflation. […] Also, there is little impetus to adjust OPR in the meantime as domestic growth and inflation are still in line with the central bank’s assessment. Therefore, we continue to expect BNM to keep the OPR unchanged at 3.00% through this year.”

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