No Immediate Need To Reduce OPR, Malaysia's Economic Outlook Remains Resilient - Analysts

By Siti Radziah Hamzah

KUALA LUMPUR, Nov 6 (Bernama) -- Bank Negara Malaysia (BNM) has room to reduce the overnight policy rate (OPR), but there is no immediate urgency to do so given the country’s resilient economic outlook, said Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid. 

He said the real interest rate currently stands at 1.25 per cent (2.75 per cent OPR minus 1.50 per cent inflation), which is higher than the long-term average of 0.69 per cent, indicating that monetary policy remains tight in real terms.

“This would mean the interest rate is still high in real terms, which suggests that BNM has room to reduce it. However, such a decision is contingent upon the evolving economic outlook.

“Thus far, the prospect for the Malaysian economy is still fairly resilient and therefore, there is no urgency for BNM to cut the OPR in the near term,” he told Bernama.

Mohd Afzanizam said BNM’s decision to maintain the OPR at 2.75 per cent was within expectations, reflecting the central bank’s confidence in domestic demand despite challenges in the global environment.

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He added that slower global trade, weaker sentiment and lower commodity production remain the main concerns, while inflation is expected to moderate in 2026 amid modest global commodity prices and the absence of excessive demand pressures.

“All in all, the current monetary policy stance is appropriate to support growth. This would mean BNM is keen to keep the OPR steady in the near future. 

“To a large degree, this can be deemed ringgit-positive, as the United States Federal Reserve (Fed) is expected to begin rate cuts in December and into 2026,” said Mohd Afzanizam.

On Thursday, BNM maintained the OPR at 2.75 per cent at its final Monetary Policy Committee (MPC) meeting for 2025.

The central bank said that at the current OPR level, the MPC considers the monetary policy stance to be appropriate and supportive of the economy amid price stability.

IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said Malaysia has room to maintain its current rate as there are no signs of a sharp downturn, such as a decline in exports or a weakening labour market.

He said slashing the rate too hastily could increase risks such as higher household debt and asset price imbalances.

“Keeping the OPR at its current level also helps provide planning stability for businesses and consumers. It supports savings and productive investments, allows for gradual policy adjustments if conditions change, and reduces the risk of the economy overheating,” said Mohd Sedek.

From a foreign investor’s perspective, this decision signals consistency and prudent risk management — in contrast to the immediate policy responses following the Federal Open Market Committee rate cuts in September and October 2025, he added.

Mohd Sedek anticipates that BNM will maintain the OPR at 2.75 per cent until the Fed rate is cut to 3.00-3.25 per cent.

“We expect the Fed to continue cutting next month. So, three cuts in total bring the Fed Fund Rate (upper bound) to 3.75 per cent from 4.50 per cent.

“In 2026, we expect the Fed to continue with another three cuts each by 25 basis points, respectively,” he said.

Mohd Sedek observed that should the Fed implement more than three rate cuts next year, or a cumulative reduction exceeding 75 basis points, it may influence Malaysia’s economic trajectory and lead BNM to reassess its policy stance.  

-- BERNAMA