BNM Governor Explains OPR Decision and Cost of Living Pressures

Samuel Chua

9th September 2025 - 3 min read

Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour says the current Overnight Policy Rate (OPR) of 2.75% is the right level to support growth while keeping prices stable.

In an interview with Bernama, he explained that the Monetary Policy Committee (MPC) decided to keep the rate unchanged at its 4 September meeting because the pre-emptive cut in July is expected to continue lifting growth through the rest of 2025 and into 2026. The committee will monitor global and domestic developments, particularly in trade and geopolitics, to ensure monetary policy remains appropriate.

Growth Outlook Underpinned By Domestic Demand

Malaysia’s economy grew 4.4% in the first half of 2025 and is on track to meet the official forecast of 4% to 4.8% for the year.

Rasheed pointed to steady employment, rising wages, and government measures such as higher civil service salaries and a new minimum wage as factors supporting household spending. Investment approvals are also rising, with the Malaysian Investment Development Authority (MIDA) recording an 18.7% year-on-year increase in the first half of 2025.

Tourist arrivals ahead of Visit Malaysia 2026 and continued demand for electrical and electronic products, particularly those tied to artificial intelligence and digitalisation, are also expected to cushion the economy against external risks.

Inflation Projected To Stay Moderate

Headline inflation averaged 1.4% between January and July, while core inflation was 1.9%. These lower readings reflect declines in food and fuel prices, including fresh vegetables, eggs, and RON97 and diesel.

BNM expects inflation to remain moderate into 2026, supported by easing global commodity prices. Domestic policy changes such as the expanded Sales and Service Tax (SST) and revised electricity tariffs are also designed to limit the impact on most households.

Cost-Of-Living Pressures Remain A Challenge

Although official inflation is low, Rasheed acknowledged that many Malaysians still feel the pinch of rising costs, particularly in food. Spending patterns, location, and income levels influence how households experience price increases.

He stressed that wage growth and the creation of quality jobs are key to addressing these concerns. More than 30,000 skilled jobs were created in 2024, accounting for about a quarter of all jobs that year. Structural reforms such as the New Industrial Master Plan (NIMP) 2030 and the National Energy Transition Roadmap (NETR) are expected to expand Malaysia’s productive capacity and support higher-paying employment.

No Signal Of Further Cuts For Now

On future policy moves, Rasheed said the July rate cut was pre-emptive to safeguard Malaysia’s growth trajectory. At the current level, monetary policy remains supportive, and the focus now is on assessing the impact of the earlier cut.

The MPC will continue to evaluate risks to growth and inflation, with its next decision scheduled for 6 November 2025.

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