KUALA LUMPUR, April 23 — Bank Negara Malaysia (BNM) has room to consider lowering the overnight policy rate (OPR) as headline inflation is below its 12-month average, said CIMB Investment Bank Bhd (CIMB IB) today.
In a research note today, CIMB IB said BNM is expected to cut the OPR by 25 basis points to 2.75 per cent on July 9.
It said such a move would bypass the Monetary Policy Committee’s (MPC) May meeting to allow the central bank to assess more macroeconomic data, particularly related to external trade following “Liberation Day” tariffs, as well as ongoing trade negotiations with the United States.
“The expected rate cut is mainly aimed at addressing growth concerns linked to the US-imposed trade tariffs and broader global trade uncertainties,” it said.
The July MPC meeting also marks the end of the 90-day US tariff pause.
CIMB IB opined that demand-driven price pressures would stay subdued, as inflation, ex fuels, moderated to 1.5 per cent year-on-year in March from 1.6 per cent in February, and services inflation stood at 2 per cent, below the 12-month average of 2.1 per cent.
“Additionally, several indicators, particularly those related to the labour market, including wage growth in the manufacturing and services sectors as well as hiring activity, continue to reflect a modest trend,” it added.
Meanwhile, MIDF Amanah Investment Bank Bhd maintained its projection for now that Malaysia’s inflation would accelerate to 2.5 per cent in 2025 versus 1.8 per cent in 2024.
It said this is largely predicated on the anticipated inflationary effects coming from policy changes by the government, particularly further subsidy rationalisation with the shift to targeted RON95 subsidy by mid-year.
“In general, we anticipate the main source of higher inflation would be from changes on the supply side,” it said in a research note today.
MIDF Amanah said it foresees that OPR will be kept at 3 per cent this year as it observes no strong indications of demand-pull inflation, and the current policy stance is still considered normal and supportive of sustainable economic growth.
Malaysia’s headline consumer price index inflation moderated to 1.4 per cent year-on-year in March, below MIDF Amanah’s estimate of 1.6 per cent to 1.8 per cent year-on-year and the market consensus of 1.6 per cent year-on-year, marking the lowest point since February 2021.
The investment bank said the current low-price pressures observed in food, non-food, and core inflation implied that the impact of last year’s government policy changes, specifically targeted subsidies, higher utility tariffs, and the sales and services tax rate hike, on overall inflation remained minimal.
“Despite the planned fuel subsidy rationalisation and other policy changes slated for this year, our forecast indicates that moderate inflation will likely extend into the second quarter of 2025,” it added.
MIDF Amanah said the projection was based on the expectation that controlled cost pressures and stable crude oil prices would effectively limit any significant upward pressure on inflation.
— Bernama
