Malaysia holds key rate steady, but warns of uncertainties from Middle East conflict
A man walks past the entrance of Central Bank of Malaysia (Bank Negara Malaysia) in Kuala Lumpur, Malaysia, July 31, 2019. Picture taken July 31, 2019. REUTERS/Lim Huey Teng
KUALA LUMPUR, May 7 : Malaysia's central bank kept its benchmark interest rate steady for the fifth straight policy meeting on Thursday, with modest inflation and steady growth offsetting energy supply disruptions arising from the Middle East conflict.
Bank Negara Malaysia maintained its overnight policy rate at 2.75 per cent, as had been predicted by all 28 economists surveyed in a Reuters poll.
The latest indicators pointed towards continued growth momentum in Malaysia in the first quarter, driven by sustained domestic demand and a strong export performance, BNM said in a statement.
Moving forward, however, uncertainties surrounding the duration and severity of the Middle East conflict will affect the outlook of domestic growth and inflation, it said.
"Nevertheless, Malaysia's strong fundamentals will continue to underpin the economy's resilience," the central bank said.
Malaysia's economy is expected to grow between 4 per cent-5 per cent this year, moderating slightly from the 5.2 per cent expansion in 2025.
Official advance estimates showed that gross domestic product rose 5.3 per cent from a year earlier in the first quarter of 2026, with the final figures to be released on May 16.
BNM said higher global commodity prices arising from the war were expected to raise domestic cost pressures, though the impact was expected to remain contained.
Headline and core inflation averaged 1.6 per cent and 2.1 per cent respectively in the first quarter of 2026, it said.
BNM said its current monetary policy stance was considered to be "appropriate and consistent with the outlook of continued price stability and sustainable economic growth," adding that it would remain vigilant to ongoing developments.
A majority of economists polled forecast no change to the policy rate for the rest of the year, with just two of 22 expecting a 25 basis point hike in the next quarter.
The central bank last lowered its policy rate in July last year as a pre-emptive move ahead of tariffs imposed by U.S. President Donald Trump.
A 19 per cent levy was imposed on Malaysian exports to the United States as part of a trade deal reached in October, though the tariff measures were later declared illegal by the U.S. Supreme Court.
