Malaysia: Vigilant BNM to extend its policy pause
BNM holds rates.
Group Research - Econs, Chua Han Teng10 Jul 2026
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Bank Negara Malaysia (BNM) extended its monetary policy pause for a sixth consecutive meeting on July 9, maintaining its Overnight Policy Rate (OPR) at 2.75%. The decision reaffirmed that the central bank’s monetary policy stance remains appropriate amid resilient economic growth and price stability, despite ongoing geopolitical uncertainty. BNM acknowledged both upside and downside risks to its outlook, and will likely remain vigilant, particularly given the fragility of the US-Iran truce. However, barring another material shock, we expect BNM to remain on hold for the rest of 2026, keeping short-end bond yields stable.

BNM maintained a constructive outlook for 2026 growth, projecting the Malaysian economy to expand firmly within its 4-5% range. It highlighted resilient growth in 2Q26, supported by sustained domestic demand and firmer-than-expected exports amid global artificial intelligence-related tailwinds. Solid domestic demand, underpinned by a resilient labour market, supportive policies, and high investment realisation, will likely cushion the economy against external shocks. Although inflation rose in 2Q26 due to higher global costs, it remained contained at around its long-term average of 2.0% and within BNM’s expectations, due to subsidies and stable demand. While BNM sees elevated global commodity prices exerting upward price pressures, we expect policymakers to maintain a wait-and-see approach unless inflationary pressures become broad-based and persistent.

Although BNM did not explicitly address recent movements in the Malaysian ringgit in its monetary policy statement, we expect investors to remain assured by the central bank’s proactive commitment to ensuring orderly foreign exchange market conditions and its ongoing measures - including the Qualified Resident Investor (QRI) programme and engagements  with government-linked entities - to encourage capital inflows, supported by Malaysia’s still-robust macroeconomic fundamentals. Malaysia’s foreign portfolio flows rebounded to positive territory of USD628mn in June 2026 from outflows of ~USD2bn in May. As such, we see little urgency for defensive policy rate hikes similar to those implemented by some regional central banks.



Chua Han Teng, CFA

Senior Economist - Asean
hantengchua@dbs.com
 
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