Petaling Jaya (Jan 23) -The Monetary Policy Committee’s (MPC) decision to maintain the overnight policy rate (OPR) at 2.75% aligns with market expectations, reflecting confidence in Malaysia’s economic performance and outlook.
Economic growth in the previous year exceeded earlier expectations, with gross domestic product (GDP) growth likely reaching the upper end of the official forecast range of between 4% and 4.8%. This momentum is expected to carry into 2026, supporting a generally optimistic growth outlook for the year.
Bank Negara Malaysia (BNM) noted that global economic resilience has been supported by lower tariffs, strong artificial intelligence-driven technology spending and firmer fiscal support measures. Despite ongoing tariff-related pressures on global growth, sustained domestic demand, easing inflation, continued technology investments and accommodative fiscal and monetary policies are expected to keep Malaysia’s economic prospects resilient.
However, the central bank highlighted that downside risks remain, including the possibility of higher tariffs, escalating geopolitical tensions and increased volatility in global financial markets. At the same time, upside potential could come from stronger technology-related investments, a milder-than-expected impact from tariffs and growth-oriented policies in major economies.
Domestically, employment conditions, wage growth and income-related policy measures are expected to support household spending. Investment activity is also projected to benefit from multi-year infrastructure projects, including smaller-scale developments. In addition, strength in electrical and electronics exports, along with higher tourist spending, is expected to support the external sector.
BNM cautioned that the growth outlook remains subject to change as global developments unfold. On inflation, both headline and core inflation are projected to stay moderate during the year, supported by easing global cost pressures. Last year, headline inflation averaged 1.4%, while core inflation stood at 2%.
The central bank views the current inflation trajectory as manageable, suggesting that the existing OPR level is appropriate to support economic growth while keeping inflation risks in check. There is no immediate urgency to adjust interest rates, as the overall economic outlook remains reasonably balanced. While inflation has shown gradual upward movement, prudence remains necessary to ensure price stability is maintained.
As a result, the OPR is expected to remain unchanged at 2.75% throughout 2026, barring any unexpected economic shocks.
For Sabahans, a stable OPR provides certainty for households, small businesses and investors, particularly in managing loan repayments and financing costs. Continued growth in tourism, construction and export-related activities also supports employment and income opportunities in Sabah, reinforcing the state’s economic resilience amid broader national and global developments.
BNM said it will continue to closely monitor and assess risks surrounding domestic growth and inflation to ensure monetary policy remains supportive and balanced.