KUALA LUMPUR: Bank Negara Malaysia is anticipated to reduce its overnight policy rate (OPR) by 25 basis points in July, according to a research note from Standard Chartered. The expected move comes in response to a moderation in economic growth and subdued inflationary pressures.
In its assessment, Standard Chartered noted that Bank Negara had highlighted a softer growth trajectory in its first-quarter (Q1) gross domestic product (GDP) report, with expansion in 2025 now likely to fall slightly below the official 4.5–5.5% target range. The research house observed that downside risks to the growth outlook remain prominent.
“GDP running below potential should help suppress core inflation in the near term,” the report stated. The bank maintained its projection for a 25bps rate cut in July, with the possibility of further reductions in 2025 should macroeconomic conditions weaken more significantly than expected.
Malaysia’s economy grew 4.4% year-on-year in Q1, moderating from 4.9% in the previous quarter. This deceleration was attributed primarily to weaker goods exports, particularly due to lower oil and gas shipments.
In response to the softer Q1 data and ongoing trade-related uncertainties, Standard Chartered revised its 2025 GDP forecast downward to 4.2%, from 5.0% previously. The firm cited reciprocal tariffs—24% and 10%—as factors that could subtract approximately 0.7 and 0.4 percentage points from GDP, respectively, assuming 30% of Malaysia’s exports are exempt and applying a U.S. import elasticity rate of 0.5 times.
Additionally, the bank revised its 2025 consumer price index (CPI) inflation forecast to 1.8% from 2.2%, citing lower-than-expected inflation data and declining oil prices.
While weaker external demand is expected to weigh on Malaysia’s economic performance in 2025, Standard Chartered noted that domestic consumption and investment are likely to remain the key drivers of growth.
-Business Times
