BNM Expected To Keep OPR At 3.0 Pct In 2025 - Banks

KUALA LUMPUR, Nov 7 (Bernama) -- Amid ongoing economic challenges, Public Investment Bank (IB) Bhd anticipates Bank Negara Malaysia (BNM) will maintain a cautious stance through 2025, likely holding the overnight policy rate (OPR) steady at 3.00 per cent for the year. 

The investment bank said this should help narrow the negative interest rate differential with US rates. 

Following Donald Trump’s recent election victory, it foresees US economic policy in 2025 concentrating on tariffs and tax changes. 

"Consequently, we expect fewer rate cuts by the US Federal Reserve (Fed) in 2025, with the timing and specifics of Fed policy adjustments contingent upon new tariff measures, adding uncertainty to the monetary outlook,” Public IB said in a research note today. 

Public IB reported headline and core inflation averaging 1.8 per cent year-on-year to date.

In its latest Monetary Policy Statement, BNM indicated that inflation is anticipated to remain manageable in 2025, underpinned by easing global cost conditions and the absence of significant domestic demand pressures.

The central bank added that inflation prospects depend on the specifics of forthcoming domestic policy measures. 

Potential upside risks to inflation include spillover effects from policy changes, fluctuations in global commodity prices, and financial market dynamics. 

Public IB noted key inflation drivers in 2025 may include the phased removal of RON95 petrol subsidies in mid-year, adjustments to the minimum wage, and an expanded scope for the sales and service tax. 

“Further subsidy rationalisation on essential goods such as sugar, white rice, and cooking oil could intensify cost-push and demand-driven pressures on consumer prices,” the bank said. 

The investment bank added that other inflationary factors will likely include civil servant salary increases starting in December 2024, mandatory Employees' Provident Fund (EPF) contributions for foreign employees, and a multi-tier foreign worker levy. 

Meanwhile, Hong Leong Investment Bank (HLIB) also expects BNM’s Monetary Policy Committee (MPC) to hold the OPR at 3.00 per cent through 2025, in response to inflationary pressures from domestic policies, including the phased reduction of RON95 support and anticipated wage hikes. 

HLIB projects inflation to rise next year, reflecting potential impacts from mid-2025 RON95 subsidy rationalisation, December 2024 civil servant salary hikes, and the February 2025 minimum wage increase.

Additional cost pass-throughs from SST scope expansion and mandatory EPF contributions for foreign workers may also contribute, HLIB added. 

“We project the Consumer Price Index to increase to 2.7 per cent in 2025 from an estimated 1.9 per cent in 2024, within Ministry of Finance’s expected range of 2.0-3.5 per cent,” HLIB said. 

-- BERNAMA