Malaysia's central bank, Bank Negara Malaysia, decided at its monetary policy meeting on the 3rd to hold the policy rate at 2.75%. This was in line with market expectations, though some had predicted a rate hike of more than three years due to rising inflation risks. The central bank had cut rates for the first time in five years in July 2025, and has since held steady, marking the seventh consecutive meeting without a change. In its statement, the central bank noted that elevated global commodity prices stemming from the Middle East conflict are putting upward pressure on domestic inflation, and due to the time lag in passing on energy costs to consumer prices, inflation is expected to remain elevated. Meanwhile, economic growth in the first half of 2026 was strong at 5.7% year-on-year, and the growth forecast for 2026 was raised from the previous 4-5% to around 5%. The market sees a possibility of a 0.25 percentage point rate hike in January 2027 due to Middle East uncertainty. The next meeting is scheduled for November 5.
Central bank holds rates, but inflation concerns and potential future hike support yields
