Hong Leong Investment Bank Bhd (HLIB) is maintaining its projection that Bank Negara Malaysia (BNM) may cut the overnight policy rate (OPR) by 25 basis points to 2.75% in the second half of 2025, should prevailing economic conditions justify such a move.

According to HLIB, several key data points will be instrumental in shaping the interest rate outlook. These include the release of US inflation figures for May, scheduled for 27 June, and the June non-farm payroll report, due on 3 July. Domestically, Malaysia’s trade data for May, to be published on 20 June, will also be closely watched.

HLIB added that developments in the ongoing Malaysia-US tariff negotiations, which are expected to conclude by 9 July, as well as any further escalation in geopolitical tensions in the Middle East, will be significant variables in assessing economic risks.

The US Federal Reserve has kept its interest rates unchanged at 4.25% to 4.50% for a fourth consecutive meeting. It has reiterated a wait-and-see approach, stating that it is seeking further clarity on how tariffs are influencing prices. Despite a relatively stable labour market, the Fed has revised its growth outlook downward while raising its inflation forecast.

“Reflecting these mixed signals, the median forecast for two cuts (50 bps) was unchanged. However, a closer look at the individual dot plot reveals a more cautious stance,” HLIB noted in its research commentary.

Referencing data from the US Federal Open Market Committee (FOMC), HLIB pointed out that recent indicators suggest US economic activity continues to grow at a solid pace. Although inflation remains somewhat elevated, unemployment remains low, and labour market conditions are described as solid.

“The committee seeks to achieve maximum employment and inflation at the 2.0% rate over the longer run. In considering the extent and timing of additional adjustments to the target range for the Fed funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks, and will continue to reduce its holdings of treasury securities and agency debt and agency mortgage-backed securities,” HLIB quoted FOMC as saying.

(Source: Bernama)

• TAGS:
• Hong Leong Investment Bank
• OPR
• Overnight Policy Rate