Malaysia's Central Bank Holds Rate Steady, Notes Easing Global Uncertainty—Update

By Amanda Lee

Malaysia's central bank left its benchmark interest rate unchanged amid steady growth, noting easing global uncertainty surrounding tariffs.

Bank Negara Malaysia on Thursday kept the overnight policy rate at 2.75%, marking a second consecutive hold.

The central bank has maintained a tighter stance than most its regional peers, supported by the relative stability of the Southeast Asian economy. It has cut only once this year, citing external risks.

Recent economic data point to continued global growth, the central bank said, adding that "the conclusion of more trade negotiations has, to some extent, eased global uncertainty."

Thursday's decision comes as Malaysia's recently signed trade pact with the U.S. helps clear some uncertainty about tariffs. Under the agreement, Malaysian exports to the U.S. face a 19% levy, though certain products are exempt from the Trump administration's trade measures.

In the third quarter, Malaysia's economy expanded at a faster-than-expected pace of 5.2%, advance estimates showed. Prices have remained steady, even as the government rolls back subsidies on items like fuel.

Headline and core inflation averaged 1.4% and 1.9% year to date, respectively.

BNM said resilient domestic demand will continue to support growth into next year, with employment, wage growth and income-related policy measures underpinning household spending.

Investment activity is expected to expand, driven by factors such as progress on multi-year projects in both private and public sectors, it said.

Looking ahead, the central bank expects headline inflation to remain moderate next year amid easing in global cost pressures, while core inflation should stay close to its long-term average given the absence of excess demand pressures.

However, it noted that growth prospects remain subject to uncertainties, particularly those tied to global developments.

Downside risks include slower global trade, weaker sentiment and lower-than-expected commodity production, while stronger global growth, firmer demand for electrical and electronics goods, and robust tourism could provide upside support.

"Recent economic developments likely gave BNM little reason to return to cutting rates just yet," said Barclays economist Brian Tan.

Barclays' base case is for a 25-basis-point rate cut to in the first quarter of 2026, though Tan said the call has become less certain and no further easing may occur this cycle if exports hold up.

Capital Economics expects that cut to come even later in the year, noting that growth is set to slow gradually and inflation is likely to remain low.

For now, senior Asia economist Gareth Leather noted, the economy is growing at a decent pace and the central bank appeared in no hurry to adjust interest rates again soon, sounding somewhat more upbeat on the outlook even as it stressed downside risks from weaker global trade and commodity production.

Write to Amanda Lee at amanda.lee@wsj.com

(END) Dow Jones Newswires

November 06, 2025 04:00 ET (09:00 GMT)