Central Bank leaves rates unchanged in March

Rates remain on hold: At its meeting on 6 March, the Monetary Policy Committee of Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.00% for the 11th consecutive meeting since May 2023. Markets had anticipated the move.

Favorable outlook for inflation, economy and currency support decision: The BNM extended its pause as both headline and core inflation remained muted in January, and the authority expected that inflation in 2025 as a whole would remain manageable. Additionally, the Bank noted that a narrowing interest rate differential between Malaysia and other major economies is positive for the ringgit, and the country’s strong recent GDP growth and structural reforms should support the currency further. Regarding the outlook for economic activity, the BNM assessed that momentum would remain strong this year despite external risks, allowing the Bank to keep rates stable.

No rate changes expected in 2025: Absent explicit forward guidance in its press release, the BNM should keep the OPR stable this year. Downside risks to interest rates include weaker-than-expected GDP growth, while higher-than-expected U.S. tariffs on Malaysia and its trading partners plus smaller-than-anticipated rate cuts by the U.S. Fed are upside risks. The BNM will reconvene on 8 May.

Panelist insight: United Overseas Bank analysts Julia Goh and Loke Siew Ting said: “All in all, we maintain our view for stable OPR through 2025 for now while continuing to monitor external uncertainties surrounding trade and tariff policies. So long as heightened trade and external risks do not lead to a shock to the global and Malaysian economy just yet, we think that BNM will continue to adopt a wait-and-see approach rather than introducing an unexpected preemptive interest rate cut in the coming months.”

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