BANK Negara Malaysia (BNM) is expected to lower the Overnight Policy Rate by 25 basis points in 2H 2025 as investment banks cite weaker growth data and tariff-related uncertainties, with additional cuts possible if economic conditions deteriorate further.
Leading investment banks are forecasting a 25-basis point reduction in Bank Negara Malaysia’s (BNM) Overnight Policy Rate (OPR) in the second half of 2025, citing subdued first quarter economic growth, elevated external uncertainties, and the impact of temporary tariff suspensions.
Public Investment Bank Bhd noted that BNM’s earlier move to lower the Statutory Reserve Requirement (SRR) by 100 basis points would serve as a crucial liquidity buffer, offering room for a data-driven policy approach amid volatile global conditions.
The investment bank added that if the current 90-day tariff suspension expires without extension — potentially raising Malaysia’s effective tariff exposure to 24 per cent — BNM may opt for a more proactive monetary response.
“This would be intended to mitigate negative spillovers on trade performance, investment activity and broader economic sentiment,” it said. “With three scheduled policy meetings remaining this year — on 9 July, 4 September and 6 November — the window for calibration remains open, though timing will depend on incoming data and developments surrounding global trade negotiations.”
Hong Leong Investment Bank echoed this view, pointing to persistent external uncertainties and a relatively benign inflation environment as key considerations for BNM’s rate decision.
Standard Chartered (StanChart), meanwhile, maintained its forecast for a 25 bps rate cut in July, with the possibility of further easing in 2025 if economic conditions worsen beyond expectations.
The bank has revised its 2025 GDP growth projection for Malaysia downwards to 4.2 per cent, from 5.0 per cent previously, due to weaker-than-expected first-quarter performance and disruptions stemming from trade tariffs.
“We estimate that a 24 per cent and 10 per cent reciprocal tariff rate will subtract 0.7 percentage point (ppt) and 0.4 ppt respectively from GDP, assuming 30 per cent of Malaysia’s exports are exempt from tariffs and a US import elasticity rate of 0.5 times,” StanChart said.
The bank also warned that lower demand from key trading partners could exert further downward pressure on growth in 2025.
Despite the headwinds, StanChart remains optimistic that domestic consumption and investment will continue to underpin economic momentum.
“Consumer spending and investment are likely to remain the key pillars of growth in 2025,” it stated. - May 19, 2025
