Malaysia's OPR Expected to Rise 25 Basis Points Before Year-End

Juwai IQI anticipates that Bank Negara Malaysia (BNM) will increase the overnight policy rate (OPR) by 25 basis points to 3.00 percent before the end of the year. The research firm's Group Co-founder and CEO, Kashif Ansari, noted that the Monetary Policy Committee (MPC) has two more meetings scheduled after the July 9 meeting, in September and November. He indicated a possibility of BNM raising the OPR in one of these upcoming sessions.

"Malaysia's economy is growing faster than most global economies, with Gross Domestic Product (GDP) increasing by 5.4 percent in the first quarter," Ansari stated in a release. "Although this growth is lower than the 6.2 percent in the previous quarter and trails some regional countries, it still significantly surpasses the average of 3.1 percent for emerging markets."

Despite this outlook, Ansari's firm still expects the MPC to maintain the monetary policy rate unchanged for the remainder of the year. "If the rate is raised towards the end of the year, it would likely stem from unexpected economic strength, exceeding the expectations of most analysts currently," he added.

Regarding the upcoming MPC meeting, Ansari's team does not foresee any changes. He believes this decision would mark a full year of stable interest rates. "However, developments in the MPC meetings in the second half of 2026 remain uncertain. For now, stable rates allow homebuyers to plan more clearly regarding mortgage payment costs. This certainty helps support more confident long-term financial decisions."

Ansari also highlighted that besides robust economic growth, a key factor that could prompt BNM to raise rates by late 2026 is oil prices, given their significant impact on inflation. "Conflicts in the Gulf have led to increased energy prices, and the effects are felt through rising inflation. Overall inflation reached 2.0 percent in May, its highest level in nearly two years. However, if peace in the Gulf region can be maintained, inflationary pressures are likely to decrease. This situation could open avenues for restoring fuel subsidy quotas, providing cheaper diesel to businesses and farmers, and reducing shipping costs for Malaysia's exports and imports," he explained. He further suggested that regional stability could boost tourism and lower airfares, all contributing to reduced inflation and a lower cost of living for Malaysians.