MARC Ratings Bhd expects Bank Negara Malaysia (BNM) to consider one potential overnight policy rate (OPR) cut in 2026, supported by low inflation and moderate economic growth.

According to MARC Ratings chief economist, Dr Ray Choy, Malaysia’s inflation remains well under control. The research house projects headline inflation at 1.4% in 2025 and 1.6% in 2026. This contained price environment provides policy flexibility for a possible adjustment to support growth.

“Because of the low inflation, we are expecting perhaps one more OPR rate cut in 2026, on account of slight moderation of growth and continued external risks,” said Choy during the MARC360 Reflections: Analyses of Malaysia’s Budget 2026 and Post-Budget Debates.

Growth Forecasts Remain Below Government Targets

MARC Ratings projects Malaysia’s gross domestic product (GDP) to grow by 4.2% in 2025 and 4.0% in 2026. These forecasts are slightly below the government’s GDP target of 4.5% to 5.5% set under the 13th Malaysia Plan.

Choy noted that the current OPR of 2.75% sits around the midpoint of BNM’s long-term policy range of 1.75% to 3.5%. This positioning, he said, gives the central bank room to act should economic conditions soften further.

With global uncertainties and trade-policy risks persisting, policymakers are expected to maintain flexibility to respond to any growth challenges.

External Volatility Could Affect Growth

Choy cautioned that Malaysia’s growth outlook remains sensitive to global developments. While the agency maintains a 4% GDP forecast for 2026, it estimates that external volatility could trim up to 0.3 percentage points from that figure.

“For GDP growth next year, while we may have our 4% GDP growth forecast, it is still subject to the volatility of the external environment,” he said, noting that scenario and sensitivity analyses point to possible downside risks.

BNM’s July 2025 Rate Cut Reflects Softer Conditions

In July 2025, BNM reduced the OPR to 2.75%, marking its first rate cut in five years. The decision came in response to a softer external environment and moderating domestic momentum.

Following the adjustment, the central bank revised its 2025 GDP growth forecast to between 4% and 4.8%, down from an earlier projection of 4.5% to 5.5%. The revision reflected slower global demand and the delayed effects of fiscal consolidation measures.

Outlook For 2026 Supported By Domestic Demand

According to the Ministry of Finance’s Economic Outlook 2026 report, Malaysia’s economy is expected to expand between 4% and 4.5% in 2026. Growth will be supported by firm domestic demand, a healthy labour market, and ongoing government reforms aimed at strengthening economic resilience.

Similarly, the International Monetary Fund (IMF) projects Malaysia’s real GDP to grow by 4.5% in 2025 and 4.0% in 2026, aligning closely with MARC Ratings’ estimates.

Overall Outlook

With inflation contained and growth steady but moderate, the conditions appear conducive for BNM to maintain an accommodative stance in the coming year. While no immediate policy changes are expected, analysts suggest that a single rate cut in 2026 remains possible, depending on how external and domestic factors evolve.

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• TAGS:
• Bank Negara Malaysia
• BNM
• Dr Ray Choy
• MARC Ratings Bhd
• OPR
• Overnight Policy Rate