Malaysia's Central Bank to Maintain OPR at 2.75% Amid Resilient Domestic Conditions and Easing Global Uncertainties

Strategic Insights -

The Bank Negara Malaysia, the country's central bank, is likely to maintain the Overnight Policy Rate (OPR) at 2.75 percent until the end of the year. This decision is supported by resilient domestic demand and improved external trade sentiment following recent US trade negotiations. The central bank's confidence in the country's macroeconomic fundamentals and the Monetary Policy Committee's assessment that the current OPR remains supportive of economic growth and price stability also contribute to this expectation.

Key Takeaways:

  • Bank Negara Malaysia is expected to maintain the Overnight Policy Rate (OPR) at 2.75 percent at least until year-end.
  • The OPR has been held at 2.75 percent since July 2022, reflecting the central bank's confidence in the country's macroeconomic fundamentals.
  • Firm domestic demand and improved external trade sentiment following recent US trade negotiations support the central bank's decision to maintain the OPR.
  • The US Federal Reserve has delivered a 25 basis-point rate cut, which was widely expected, amid concerns over the economic outlook.
  • The US Federal Reserve has revised its outlook for the federal funds rate, projecting 3.5-3.75 percent by end-2025, equivalent to 75 basis points of cuts.
  • UOB Global Economics and Markets Research expects two more 25 basis-point rate cuts in the remaining Federal Open Market Committee meetings this year, one each in October and December.
  • The US Federal Reserve has revised its outlook for the federal funds target rate, projecting 3.75 percent by end-2025, with a terminal rate of 3.25 percent in 2026.

Statistics:

  • Overnight Policy Rate (OPR) at 2.75 percent (Bank Negara Malaysia).
  • 25 basis point rate cut by the US Federal Reserve (Federal Open Market Committee).
  • Federal funds rate projection of 3.5-3.75 percent by end-2025 (UOB Global Economics and Markets Research).
  • Two more 25 basis-point rate cuts expected in the remaining Federal Open Market Committee meetings this year (UOB Global Economics and Markets Research).
  • Federal funds target rate projection of 3.75 percent by end-2025 (UOB Global Economics and Markets Research).
  • Terminal federal funds target rate of 3.25 percent in 2026 (UOB Global Economics and Markets Research).

Sources:

  • Hong Leong Investment Bank Bhd (HLIB Research)
  • Maybank Investment Bank Bhd (Maybank IB)
  • UOB Global Economics and Markets Research