RHB INVESTMENT BANK MAINTAINS OPR FORECAST AT 3.00 PCT FOR 2025

KUALA LUMPUR, May 8 (Bernama) -- RHB Investment Bank Bhd (RHBIB) has maintained its base case forecast for the Overnight Policy Rate (OPR) at 3.00 per cent throughout 2025. 

Ir said in a statement that it sees a balance of risk for a potential 25-basis points (bps) cut in the second half of 2025 (2H 2025), with this risk to be substantially magnified if Malaysia's gross domestic product (GDP) growth declines below 4.0 per cent. 

“In our view, three key factors will guide OPR decisions, namely Malaysia’s economic momentum, with growth expected to slow from the second quarter (2Q) of 2025 onwards; the inflation trajectory; and to a lesser extent, the direction of global interest rates,” it said.

Bank Negara Malaysia (BNM) has previously indicated a broader policy focus beyond interest rates to mitigate the effects of the United States (US) tariff actions and spillover from rising trade tensions. 

“Should growth weaken more sharply than expected, especially if domestic demand and labour market conditions begin to soften - a rate cut in 2H 2025 cannot be ruled out,” said RHBIB. 

It further said that amid rising external risks and uncertainties, RHBIB has revised Malaysia’s 2025 GDP growth forecast to 4.5 per cent, down from 5.0 per cent. 

“Risks now lean towards a lower range of 3.5 - 4.0 per cent should trade tensions worsen,” it said. 

On the ringgit, RHBIB maintained its year-end forecast at 4.2-4.3 per US dollar, supported by positive economic growth, ongoing fiscal reforms and narrowing US dollar-ringgit real rates differences. 

However, fluctuations in foreign inflows and uncertainty around US foreign policies, including geopolitical and trade issues, could create headwinds and increase foreign exchange (FX) market volatility, affecting the ringgit. 

“Inflation is expected to remain manageable in 2025, with our forecast at 2.2 per cent, supported by easing global commodity prices and subdued domestic demand pressures,” it said. 

Meanwhile, OCBC senior ASEAN economist Lavanya Venkateswaran said the bank research believed BNM was more dovish compared with its March 6 meeting. 

"This does open the door for potential interest rate cuts, but the statement does not suggest that it will come imminently. 

"Our baseline is for a cumulative 50 bps in rate cuts in 1H 2026 but there is a clear risk that the rate cut could be brought forward to 2H 2025," it said. 

To further support liquidity conditions, BNM reduced the Statutory Reserve Requirement (SRR) by 100bp to 1.0 per cent, releasing RM19 billion of liquidity effective May 16. 

BNM noted that the SRR is an instrument to manage liquidity and is not a signal on the stance of monetary policy. 

That said, SRR cuts have more often than not been precursors to OPR cuts or have at least accompanied cuts in the OPR. 

In the last easing cycle, SRR was cut by 50 bp in November 2019, followed by a 25 bp rate cut to the OPR in January 2020. 

OPR and SRR were reduced further at the March 2020 meeting.

BNM’s Monetary Policy Committee today maintained the OPR at 3.0 per cent.

-- BERNAMA