By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) -Malaysia’s central bank is expected to hold its key interest rate at 2.75% on Thursday and keep it there until at least 2027, according to economists polled by Reuters as soft inflation and resilient economic growth ease pressure for further cuts.
Inflation edged up to just 1.2% in July, staying below Bank Negara Malaysia’s 2025 forecast range of 1.5% to 2.3% for most of the year, while gross domestic product (GDP) grew 2.1% quarter-on-quarter, accelerating from 0.7% in the previous three months- suggesting little need for more monetary easing.
BNM cut rates in July for the first time in five years to support the economy amid rising trade uncertainty but economists said the move was a one-off rather than the start of an easing cycle.
With interest rates already quite low, economists said the central bank would now pause to gauge the impact of a 19% U.S. tariff on Malaysian exports and broader long-term risks.
A strong majority of economists, 29 of 32, forecast BNM will hold its overnight policy rate at 2.75% at its September 4 meeting. The remaining three expect a 25-basis-point cut to 2.50%.
“The central bank moved pre-emptively in July with a 25bp cut to provide a more accommodative setting, and unless there has been a material deterioration in economic conditions since then, that easing should remove the immediate need for further cuts,” said Woon Khai Jhek, senior economist at RAM Ratings.
“Bank Negara is likely to navigate policy by closely monitoring the data flow and by emphasising clear communication to manage expectations. I believe the 19% U.S. tariff outcome is within BNM’s expected range of scenarios, so it does not automatically compel an immediate policy response.”
A strong majority of 75% of economists, 21 of 28 surveyed, predicted rates would remain at 2.75% until end-year. Six forecast a 25-basis-point cut to 2.50% while one sees a deeper 50-basis-point cut to 2.25%.
Among those who provided longer-term views, over two-thirds of economists projected BNM has come to the end of its easing cycle with a terminal rate of 2.75% at least until 2027.
(Other stories from the September Reuters global economic poll)
(Reporting by Veronica Khongwir; Polling by Susobhan Sarkar and Pranoy Krishna; Editing by Sharon Singleton)
