BNM Keeps OPR at 2.75%, Maintains Cautious Stance Despite Inflation Risks

Bank Negara Malaysia (BNM) has maintained the Overnight Policy Rate (OPR) at 2.75% following its November Monetary Policy Committee (MPC) meeting, in line with market expectations.

The decision reflects the central bank’s assessment that the current monetary policy setting remains appropriate to support economic growth while preserving price stability.

In its latest assessment, BNM acknowledged increasing inflationary pressures heading into 2027 but gave no indication of an immediate interest rate hike.

An economic research report dated November 5 maintained its forecast that the OPR would remain unchanged at 2.75% throughout 2027, although the risks of a rate increase have shifted upwards.

The report said inflation was expected to edge higher next year but would probably remain manageable, without generating sufficiently broad-based price pressures to justify monetary tightening.

It noted that BNM appeared comfortable looking through supply-driven inflation risks as long as underlying demand pressures remained contained and inflation expectations stayed anchored.

However, several factors could complicate the inflation outlook, including geopolitical tensions, energy-market disruptions, adverse weather conditions, food supply uncertainties, rising labour costs and possible domestic policy adjustments, particularly subsidy rationalisation.

The report said stronger economic growth alone was unlikely to trigger an OPR increase. Clearer evidence of sustained wage growth, stronger household spending, faster credit expansion and broader inflationary pressures would probably be required before monetary tightening was considered.

Meanwhile, improving global financial conditions, including a weaker US dollar, lower Brent crude oil prices and declining US Treasury and Malaysian Government Securities yields, were seen as reducing external pressure on domestic monetary policy.

The report concluded that the OPR was likely to remain at 2.75% throughout 2027, although the policy bias had shifted towards a possible rate increase rather than a reduction.

Any tightening, it added, would depend on sustained increases in core inflation, wages and domestic demand.