Malaysia holds key rate as economy proves resilient to tariffs
Standing pat gives the central bank room to act decisively if conditions worsen next year
MALAYSIA kept interest rates unchanged as the central bank remained confident that the economy can weather US tariffs without the rate relief that has swept across South-east Asia.
Bank Negara Malaysia (BNM) left the overnight policy rate at 2.75 per cent in its final monetary policy decision of the year on Thursday (Nov 6), a move seen by all 22 economists in a Bloomberg survey.
The central bank, which cut borrowing costs only once in 2025, said it considers the monetary policy stance to be appropriate and supportive of the economy amid price stability.
Still, policymakers aired caution about the potential for higher product-specific tariffs and an escalation of geopolitical tensions. It also flagged concerns over the “elevated valuations in financial markets”.
The Monetary Policy Committee “will continue to monitor ongoing developments and assess the balance of risks surrounding the outlook for domestic growth and inflation”, BNM said.
Malaysia’s steady economic growth and muted inflation support BNM’s decision to extend its rate pause even as central banks across the region, including the Philippines and Indonesia, signal more easing ahead. Standing pat gives BNM room to act decisively if conditions worsen next year.
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Malaysia’s government expects growth to moderate to 4-4.5 per cent next year, from 4-4.8 per cent in 2025, amid heightened external volatility.
US President Donald Trump and Malaysia’s Prime Minister Anwar Ibrahim signed trade and critical minerals deals in Kuala Lumpur on Oct 26. The trade agreement reaffirmed the 19 per cent tariff rate for Malaysia that Washington had already imposed.
Malaysia is in negotiations with the world’s largest economy to exempt its semiconductors from levies. The US is Malaysia’s third-largest export market for chips.
For now, the South-east Asian nation’s exports have held up, while economic growth unexpectedly accelerated in the third quarter.
Headline inflation is expected to remain moderate, while the core gauge is seen to remain stable and close to its long-term average, BNM said. The consumer price index has averaged 1.4 per cent in the first nine months of the year, with the government lowering its full-year forecast to 1-2 per cent last month.
The ringgit has advanced almost 7 per cent this year against the dollar, making it the top-performing currency in Asia.
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