Bank Negara Malaysia (BNM) has reduced the Overnight Policy Rate (OPR) by 25 basis points to 2.75%, marking its first rate cut since 2020. The decision, announced after the Monetary Policy Committee (MPC) meeting, is aimed at supporting domestic growth amid continued external uncertainties and moderating inflation pressures.
In its statement, BNM highlighted that while Malaysia’s economy remains on a steady growth path, downside risks persist due to a weaker global environment. The central bank cited slower-than-expected global demand, ongoing geopolitical tensions, and tighter financial conditions in major economies as factors weighing on Malaysia’s export performance and business sentiment.
The rate cut is intended to provide a more accommodative monetary stance to encourage household spending and business investment. “At the current OPR level, the monetary policy stance is consistent with the current assessment of inflation and growth prospects” BNM said.
The move comes amid growing expectations of monetary policy easing in the region, as other central banks respond to weakening global trade and capital flows. Analysts note that the rate cut could help bolster consumer and investor confidence, especially as domestic private sector activity becomes a more prominent driver of growth.
The rate cut is expected to filter through to lower borrowing costs for consumers and businesses. Banks may revise their base lending and base financing rates downward, potentially reducing monthly repayments for floating-rate loans, including mortgages, personal loans, and hire-purchase agreements. At the same time, deposit rates may decline slightly, which could influence household saving behaviour.
The timing of the rate cut reflects a balancing act by BNM. While domestic indicators such as labour market recovery and consumer spending remain broadly stable, the external sector continues to face pressure from slowing global trade. Easing the OPR at this juncture could help sustain internal demand and cushion the economy against external shocks, especially as Malaysia pivots toward more consumption-driven growth. However, the effectiveness of the cut may be limited if consumer confidence remains cautious or if lending standards tighten further.
BNM reaffirmed its commitment to ensuring price stability and sustainable economic growth. The central bank emphasized that future monetary policy decisions will continue to be data-dependent and guided by evolving economic and financial developments. The next MPC meeting is scheduled for September 2025.
Chelsea covers business and economic news in Malaysia, providing insights on market trends, corporate developments, and financial policies. More about Chelsea Low.
