Bank Negara maintains policy rate, says current stance fit for purpose

KUALA LUMPUR (July 9): Malaysia’s central bank kept the benchmark interest rate unchanged on Thursday, saying that its policy stance is still fit for resilient growth and tame inflation.

The overnight policy rate is maintained at 2.75% following the fourth of six scheduled reviews for the year, Bank Negara Malaysia (BNM) said in a statement on Thursday. The move was correctly predicted by 24 of 25 economists polled by Bloomberg.

At the current level, BNM said it “considers the monetary policy stance to be appropriate and consistent with the outlook of continued price stability and sustainable economic growth”.

The central bank has stood pat at every scheduled review since cutting the policy rate by 25 basis points in July last year. BNM’s latest forecasts call for the economy to expand between 4.0% and 5.0% in 2026 and for inflation to average 1.5% to 2.5%.

The economy has held up, expanding 5.4% year-on-year in the first three months of 2026 even as war in the Middle East raged on. Inflation, meanwhile, has crept up but remained benign for consumers shielded by a system of fuel subsidies and price control on essential goods.

Latest developments point towards resilient growth in the second quarter, driven by sustained domestic demand and stronger-than-expected export performance, BNM said.

“Malaysia’s strong fundamentals will continue to underpin the economy’s resilience against external shocks,” the central bank noted.

On inflation, BNM noted headline and core inflation in the first five months of the year have been broadly within expectations despite “some initial pass-through” from higher global cost pressures.

Still, any impact from the West Asia geopolitical troubles on inflation this year is expected to remain “contained, reflecting domestic policy measures and stable demand conditions, which will mitigate the pass-through of external cost pressures to domestic prices”, the central bank said.

BNM added that it will remain vigilant and assess the balance of risks as ongoing uncertainties in the Middle East could affect the domestic outlook on growth and inflation.

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