Analysts predict OPR to stay 3pct this year supported by robust growth outlook

KUALA LUMPUR: THE overnight policy rate (OPR) is expected to remain steady at three per cent throughout 2025, supported by Malaysia's stable inflation and robust growth outlook, according to analysts.

RHB Investment Bank Bhd (RHB Research) economist Chin Yee Sian said the Bank Negara Malaysia's (BNM) decision to keep OPR at three per cent on Wednesday is in line with the firm's in-house view and market expectations.

The central bank has kept the OPR at the current level for 10 consecutive Monetary Policy Committee (MPC) meetings since May 2023.

Assuming steady economic prospects and manageable inflation pressures, Chin said three key factors will drive OPR behaviour this year.

These include Malaysia's economic momentum with growth projected at five per cent and the inflation trajectory with headline inflation to rise by 2.4 per cent and the behaviour of global rates in the foreseeable future, to a lesser extent.

He said the inflation trajectory for Malaysia will be influenced by the potential impact of subsidy retargeting measures, the expansion of the sales and service tax (SST), possible demand increases from higher household incomes and fluctuations in global commodity prices. 

"At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects. 

"The MPC would remain vigilant to ongoing developments and ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," he said.

Echoing the same sentiment, MIDF Research said OPR was maintained at three per cent this year as the

The current setting remains accommodative to sustainable economic growth.

The firm said Malaysia's economy will continue to grow, underpinned by both increases in domestic and external demand. 

"While we forecast inflation will accelerate this year due to changes on the supply side, such as policy changes and higher costs, we do not expect any change to OPR because underlying price pressures will likely remain under control. 

"Nevertheless, BNM has sufficient policy flexibility to adjust monetary policy to counter future economic uncertainties, mainly subject to changes in domestic economic conditions and inflation outlook in Malaysia," it said.

Therefore, MIDF Research estimates the full-year inflation for 2025 to pick up to 2.8 per cent in 2025, driven by the changes in government policies, such as the subsidy rationalisation efforts by the government.

Public Investment Bank Bhd economist Sabrina Edora said the OPR status quo will be unchanged this year as the negative interest rate differential with US rates narrows.

However, she also noted that the possibility of the Federal Reserve pausing its rate cuts cannot be ruled out.

"We believe the MPC is likely to adopt a wait-and-see approach, seeking further clarity on US trade and tariff policies, upcoming data releases, and domestic policy developments to assess their impact on growth and inflation. 

"While US president Donald Trump refrained from imposing immediate tariffs on Day 1, he has reaffirmed that tariffs remain a key priority on his agenda, subsequently announcing tariffs on China, Canada, and Mexico effective from Feb 1," Sabrina added.

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