Malaysia’s central bank maintains key policy rate, says growth momentum to continue in 2027

KUALA LUMPUR - Malaysia's central bank, Bank Negara Malaysia, maintained its key policy rate of 2.75% for the seventh consecutive policy meeting on September 3, as anticipated, despite robust economic growth and manageable inflation. The bank had previously lowered rates by 25 basis points in July 2025. Malaysia's economy outperformed regional counterparts in 2026, with the bank projecting GDP growth at 5% for 2026, near the top of its official range of 4-5%.

Q2 GDP grew by a stronger-than-expected 6%, driven by strong export demand for tech-related goods and sustained tourist spending, according to the bank. "Stable labor market conditions and ongoing investment activity will continue to support domestic demand," the bank added, noting that outlooks were subject to risks from Middle East conflicts and lower commodity production.

The Malaysian stock market and currency showed minimal movement after the decision. Higher tech investments and exports, fueled by global AI infrastructure growth, have helped shield Malaysia from economic shocks stemming from the US-Israeli conflict with Iran. Inflation remained contained, partially due to fuel subsidies and other government aid.

Headline and key inflation rates averaged 1.8% and 2% respectively for the first seven months of the year, per the bank. The bank deemed its monetary policy "consistent with the outlook of continued price stability and sustainable economic growth," remaining vigilant to cost pressures and domestic demand dynamics. Out of 19 economists surveyed by Reuters for longer-term forecasts, 19 expect the policy rate to stay at 2.75% through the end of 2027, with seven predicting a 25 basis point increase to 3.0%.