RESILIENT domestic demand and still-contained underlying inflation should allow Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at 2.75 per cent throughout 2026, said Kenanga Investment Bank Bhd (Kenanga IB).
In a research note, it said headline inflation had remained benign, though sustained disruptions around the Strait of Hormuz continued to pose upside risks via higher imported fuel, fertiliser and logistics costs.
“Policy stability (should) remain the central objective; heightened external uncertainty and a relatively resilient ringgit provide the central bank with sufficient flexibility to stay on hold,” it said, reported Bernama.
On the US dollar-ringgit year-end forecast, Kenanga IB kept the rate at 3.95, driven less by the precise number of US Federal Reserve interest rate cuts and more by expectations of a broader structural weakening of the greenback.
It noted that this was also “supported by reserve diversification, portfolio reallocation, and growing concerns over US fiscal sustainability.”
The investment bank said domestic fundamentals remained supportive, with foreign currency deposits reaching a record RM305.8 billion in April, highlighting substantial latent conversion potential into the ringgit over time.
“That said, risks have become more balanced. While geopolitical tensions in West Asia could keep oil prices, inflation expectations and US dollar demand elevated for longer, we view domestic political developments as an increasingly important source of market sensitivity,” it said. – June 10, 2026
