Malaysia's central bank maintains key policy rate, says growth momentum to continue in 2027

Bank Negara Malaysia maintained its overnight policy rate at 2.75%

Rozanna Latiff | Reuters News

KUALA LUMPUR – Malaysia’s central bank kept its benchmark interest rate steady for the seventh straight policy meeting on Thursday, as expected, amid strong economic growth and moderate inflation.

Bank Negara Malaysia maintained its overnight policy rate at 2.75%, as had been forecast by all but two of 31 economists surveyed in a Reuters poll. It last cut rates by 25 basis points in July 2025.

Malaysia’s economy has outperformed most regional peers this year, with BNM expecting growth for 2026 to come in around 5%, at the upper end of its official projection of 4%-5%. Gross domestic product grew by a stronger-than-expected 6% in the second quarter from a year earlier.

Sound fundamentals were expected to keep growth resilient in 2027, with expansion to be driven by robust export demand, particularly for tech-related goods, and sustained tourist spending, BNM said in a statement.

“Stable labour market conditions and ongoing investment activity will remain supportive of domestic demand,” it said, adding the outlook was subject to downside risks from prolonged conflict in the Middle East and lower commodity production.

Malaysia’s stock exchange and ringgit currency were largely unchanged following the rate decision.

Higher tech investments and exports, powered by the global growth in artificial intelligence infrastructure, have helped shield the Southeast Asian country from economic shocks arising from the U.S.-Israeli war on Iran.

Inflation has also been contained in part by fuel subsidies and other government assistance. Prime Minister Anwar Ibrahim on Sunday restored higher quotas for subsidised petrol and diesel, after lowering them earlier this year to offset a jump in oil prices.

Headline and core inflation in the first seven months of the year averaged 1.8% and 2% respectively, BNM said.

BNM said it considered monetary policy “to be consistent with the outlook of continued price stability and sustainable economic growth” and that it would remain vigilant to cost pressures and domestic demand conditions.

A majority of 19 economists in the Reuters poll who provided longer-term forecasts expect the policy rate will remain at 2.75% through end-2027, with seven expecting a 25 basis-point increase to 3.0%.

(Reporting by Rozanna Latiff; Editing by John Mair)

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