Could stronger economic growth prompt BNM to raise the OPR by 25 bps?

Question

Accepted Answer

Stronger Economic Growth Could Lead to a 25 Basis Point OPR Hike by BNM

While the base case anticipates the Overnight Policy Rate (OPR) remaining unchanged, a stronger-than-expected economic performance could prompt Bank Negara Malaysia (BNM) to implement a 25 basis point increase. This potential adjustment, bringing the benchmark rate to 3.0 per cent, might occur at either the September or November Monetary Policy Committee (MPC) meetings.
Factors Influencing a Potential Rate Hike

The primary catalyst for such a rate adjustment would be an economic expansion that significantly surpasses current projections. This scenario is particularly plausible if domestic economic activity proves more robust than anticipated, or if oil prices maintain a persistently high trajectory, thereby contributing to inflationary pressures.
Oil Prices as a Key Inflationary Driver

Beyond the general strength of economic growth, the price of oil stands out as the most significant factor that could compel BNM to consider a rate increase later in 2026. Fluctuations in oil prices have a substantial impact on inflation, and sustained increases could necessitate a policy response to manage these pressures.
Current Economic Conditions and Outlook

Economists generally agree that BNM is expected to maintain the OPR at its current level of 2.75 per cent for the remainder of 2026. This stance is supported by resilient external sector performance, moderate domestic demand, and manageable inflationary risks. For instance, exports saw robust year-on-year growth of 45.3 per cent in May 2026, driven by significant increases in the electrical and electronic sector, as well as liquefied natural gas exports. The current account surplus also widened to 3.0 per cent of gross domestic product in the first quarter of 2026, partly due to stronger exports of information and communication technology services.

Reading history

Hide →

This history is cleared when the page is closed.

Could stronger economic growth prompt BNM to raise the OPR by 25 bps?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends