- Malaysia will likely hold its benchmark interest rate on Thursday (Jul 9) and signal a possible hike later this year as the artificial intelligence boom drives faster-than-expected economic growth.
- According to 24 of 25 economists surveyed by Bloomberg, Bank Negara Malaysia is set to keep its overnight policy rate at 2.75 per cent, where it has been since July 2025.
- The tech boom, coupled with robust consumer demand and investment, powered Malaysia’s gross domestic product growth to 5.4 per cent in the first quarter, well above BNM’s expectation of 4 to 5 per cent for this year.
- A more positive growth assessment could signal that BNM may soon undo its “precautionary” 25-basis point rate cut in 2025, aimed at shoring up the economy from higher US tariffs.
- Barclays’s Brian Tan expects a quarter-point hike later this year, along with ANZ and JPMorgan, stating that a more hawkish tone in the July policy statement would help lay the groundwork for that hike.
Bank Negara Malaysia (BNM) is poised to maintain its overnight policy rate at 2.75%, where it has remained since July 2025, while signaling a potential hike later this year. This decision comes as the artificial intelligence (AI) boom drives Malaysia's economic growth beyond expectations.2
The country's GDP growth reached 5.4% in the first quarter, surpassing BNM's forecast of 4% to 5% for the year. Economists from HSBC noted that surging demand for AI technology has significantly boosted exports, while local fuel subsidies have mitigated the impact of rising crude prices.
“While some Asean central banks have rushed to hike rates, we do not believe the same conditions apply to Malaysia,” said HSBC economists Yun Liu and Madhurima Nag. Inflation has remained contained due to these subsidies, with CIMB Bank lowering its 2026 inflation forecast to 2.2% from 2.3%.
Analysts predict that a more positive growth outlook could lead BNM to reverse its 25-basis-point rate cut made in 2025, aimed at supporting the economy amid higher US tariffs. Barclays’ Brian Tan anticipates a quarter-point hike later this year, contingent on a more hawkish tone in the upcoming policy statement.5
BNM's strategy of attracting foreign-exchange inflows suggests that interest rate adjustments are unlikely in the near term, according to DBS Bank economist Radhika Rao. The central bank's cautious optimism reflects its assessment of Malaysia's growth and inflation outlook.
“24 of 25 economists surveyed by Bloomberg expect the overnight policy rate to stay at 2.75%. Barclays, ANZ, and JPMorgan predict a quarter-point hike later this year, with a hawkish July statement seen as laying the groundwork.”
The Edge Malaysia
