Bank Negara Malaysia Maintains Interest Rates, Expects Economy Stabilization in 2025 By Investing.com

Investing.com – Bank Negara Malaysia (BNM) once again chose to keep its key interest rate steady at 3.0%. This decision is consistent with the expectations of 30 economists, who expected no changes in the interest rate. Malaysia’s rate has remained unchanged since its last increase of 25 basis points in May 2023.

Capital Economics, a leading economic research firm, notes that while other central banks may cut interest rates in the coming months, Malaysia’s central bank is expected to maintain the current interest rate throughout the year.

This decision supports the strength of the Malaysian economy, which showed strong growth of 4.8% year-on-year in the fourth quarter, according to preliminary figures released last week.

The National Central Bank expressed confidence in the continued strength of the economy in 2025, driven primarily by resilient domestic spending. This was stated in their announcement today, indicating a positive outlook for the coming year.

However, the future of inflation in Malaysia is less certain. The headline rate was reported at a modest 1.7% year-on-year in December, with figures released today. However, inflation is expected to rise later in the year due to the implementation of long-planned subsidy cuts to gasoline prices.

These changes, announced in the budget, aim to improve public finances. As a result, the headline rate is expected to rise above 3% next year.

Inflation exceeding 3% year-on-year is likely to fall outside what is considered the central bank’s comfort zone, as Malaysia’s central bank does not have a clear inflation target. The Malaysian Central Bank indicated in its statement today that future inflation will be affected by the impact of domestic policy measures.

Although some analysts expect interest rate cuts for 2025, the majority, including Capital Economics, do not expect any interest rate changes this year.

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