BNM Expected To Hold Rates Steady Through 2025 After OPR Cut – Investment Banks
KUALA LUMPUR, July 10 (Bernama) -- Public Investment Bank Bhd (Public IB) expects Bank Negara Malaysia (BNM) to hold interest rates steady for the remainder of 2025, following the recent overnight policy rate (OPR) cut.
Yesterday, BNM reduced the OPR by 25 basis points (bps) to 2.75 per cent at its fourth Monetary Policy Committee (MPC) meeting of the year, marking the first rate cut since July 2020.
However, Public IB noted that the July MPC statement does not signal a series of rate cuts.
In a research note, the bank said that with real policy rates still in positive territory and inflation expectations well anchored, the move appears intended to provide an early buffer rather than mark the start of a full easing cycle.
"We assess BNM’s policy bias as conditionally accommodative, with any further adjustment contingent on a marked deterioration in global conditions or more pronounced domestic weakness.
"With two policy meetings remaining (September and November), BNM retains policy space to respond. However, prevailing uncertainty, particularly surrounding the United States' trade policy and global demand, suggests a patient, data-driven approach," it said.
As such, the bank maintained its OPR forecast at 2.75 per cent through end-2025.
Similarly, Maybank Investment Bank Bhd projected no further rate cuts this year, while the earnings forecast for Malaysian banks remained unchanged.
"We have already anticipated, and factored in, the impact of one rate cut in the second half of 2025, for which we had recently trimmed our net interest margins (NIMs) by two to three basis points (bps) on average, across the board – our earnings forecasts are thus unchanged.
"For the banks in our coverage, we expect an aggregate NIM compression of two bps to an average of 2.06 per cent in 2025 and flat NIMs in 2026," it said, maintaining its 'neutral' call on the banking sector.
On the other hand, CIMB Investment Bank Bhd said the likelihood of another OPR cut beyond July would depend on incoming data, particularly relating to growth and trade dynamics.
It noted that the domestic economy remains supported by a healthy labour market, with the unemployment rate declining to three per cent, signalling firm underlying conditions.
"Inflationary pressures remain contained, with headline inflation projected at 2.2 per cent, while the ringgit has appreciated by 5.2 per cent year-to-date, helping to ease imported cost pressures.
"These dynamics suggest there is sufficient policy space should downside risks to growth intensify further in 2H 2025," the bank added.
-- BERNAMA