BMI has maintained its view that Bank Negara Malaysia(BNM), will keep the overnight policy rate unchanged at 2.75% throughout 2026, supported by resilient domestic demand.

The Fitch Solutions unit said minutes from BNM’s November 2025 monetary policy meeting showed no change in the central bank’s assessment of the 2026 growth outlook compared with its September review.

Domestic Demand Continues To Support Growth

BMI said BNM continues to see domestic demand as a key growth driver, providing a stable base for the economy even as overall growth moderates.

The research firm expects Malaysia’s economic growth to slow from an estimated 4.6% in 2025 to 4.1% in 2026. This projection sits at the lower end of BNM’s official forecast range of 4.0% to 4.5%.

BMI said its outlook broadly aligns with the central bank’s assessment of economic conditions.

Inflation Pressures Remain Manageable For Now

According to BMI, BNM currently has limited concerns over inflation. Headline inflation, which measures overall price changes across the economy, has broadly tracked expectations, averaging 1.4% between January and November 2025.

However, BMI has revised its 2026 inflation forecast slightly higher. It now expects inflation to average 1.9% in 2026, up from a previous estimate of 1.7%.

This revision reflects anticipated cost pressures from the second phase of civil servant wage increases in January 2026, as well as a second RM100 cash handout scheduled for February.

Inflation Forecast Near Upper End Of Government Range

BMI noted that its revised inflation forecast sits near the upper bound of the government’s projected range of 1.3% to 2.0% for 2026.

Even so, the estimate remains broadly in line with Malaysia’s average inflation rate of 1.8% recorded between 2020 and 2024.

Ringgit Forecast Revised On Interest Rate Outlook

BMI has also updated its foreign exchange outlook, now expecting the ringgit to strengthen to RM4 against the US dollar by the end of 2026.

The firm said this revision follows changes to its US interest rate assumptions. Its Americas team now expects the US Federal Reserve to cut the federal funds rate by an additional 50 basis points, bringing the terminal rate to 3.25%, down from an earlier forecast of 3.50%.

With BNM expected to keep the OPR unchanged, BMI said the resulting shift in yield differentials could move in favour of the ringgit over the medium term.

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