Malaysia’s central bank holds rates again, says growth momentum to continue in 2027

Published Thu, Sep 3, 2026 · 03:56 PM

[KUALA LUMPUR] Malaysia’s central bank kept its benchmark interest rate steady for the seventh straight policy meeting on Thursday (Sep 3), saying it expected strong economic growth to continue in the coming year.

Bank Negara Malaysia (BNM) maintained its overnight policy rate at 2.75 per cent, 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 per cent, at the upper end of its official projection range.

Gross domestic product grew by a stronger-than-expected 6 per cent 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.

Vigilant to cost pressures

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

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 per cent and 2 per cent, respectively, noted BNM.

BNM added that it considered its 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.

OCBC economist Lavanya Venkateswaran said that BNM’s omission of the word “appropriate”, which it had used to describe its monetary policy stance at its July meeting, pointed to a hawkish turn.

The word’s removal “suggests that, going forward, the build-up of price pressures amid strong growth could support policy normalisation”, she told Reuters, adding that she expected a 25-basis-point rate hike in January.

Capital Economics, however, expects rates to be left on hold throughout 2027 amid steady growth and moderate inflation, in line with the view of the majority of analysts polled by Reuters on their longer-term forecasts.

“The economy is growing rapidly, helped by the AI boom, and is in little need of extra support from the central bank,” its senior Asia economist Gareth Leather noted. REUTERS