Bank Negara Malaysia maintains benchmark rate, predicts stable economy in 2025 By Investing.com

Investing.com — Bank Negara Malaysia (BNM) has again decided to keep its main interest rate steady at 3.0%. This decision is in line with the expectations of 30 economists, who predicted no changes in the reference rate. The rate in Malaysia was unchanged from the last increase of 25 basis points in May 2023.

Capital Economics, a leading economic research firm, suggests that while other central banks may cut their rates in the coming months, BNM is expected to maintain its current rate throughout the year.

The decision is supported by the strength of Malaysia’s economy, which showed strong growth of 4.8% year-on-year in the fourth quarter, according to preliminary data released last week.

BNM expressed confidence in the continued strength of the economy in 2025, driven primarily by resilient domestic consumption. This was stated in their press release today, pointing to positive prospects for the coming year.

However, the future of inflation in Malaysia is less certain. The headline rate was recorded at a modest 1.7% year-on-year in December, with the figures released today. However, inflation is forecast to rise later in the year due to the implementation of the long-planned reduction in fuel price subsidies.

These changes, which were announced in the budget, aim to improve public finances. As a result, the prime rate is expected to rise above 3% next year.

Inflation exceeding 3% annually could potentially fall outside what is considered the central bank’s comfort zone, as BNM does not have an explicit inflation target. In today’s statement, BNM pointed out that future inflation will be influenced by domestic policy measures.

Despite some analysts predicting interest rate cuts in 2025, most, including Capital Economics, are not predicting a change in the benchmark rate this year.

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