Bank Negara Malaysia (BNM) has kept its benchmark interest rate unchanged, citing the economy’s resilience despite external tariff shocks, as growth last year exceeded official projections and inflation remained well-contained, Kumparan reports.

At its first monetary policy meeting of the year on January 22, the central bank maintained the overnight policy rate (OPR) at 2.75%, in line with the expectations of all 22 economists surveyed by Bloomberg. Over the past five years, BNM has cut rates only once, and said the current policy stance remains appropriate and supportive of economic activity.

“Growth momentum is expected to continue in 2026, supported by sustained strength in domestic demand,” BNM said in its statement.

Global investors have continued to channel funds into Malaysia, drawn by economic stability and strong fundamentals. The Southeast Asian economy has weathered the impact of 19% tariffs imposed by US President Donald Trump last year. At the same time, full-year growth exceeded the government’s target, underpinned by robust domestic demand.

Mohd Afzanizam Abdul Rashid, Chief Economist at Bank Muamalat Malaysia Bhd, said the decision reflected confidence in the outlook and expected the policy rate to remain unchanged throughout the year.

“There is no urgency for BNM to lower the OPR, as growth prospects remain favourable,” he said.

The ringgit, which has been Asia’s best-performing currency over the past 12 months, was little changed following the announcement.

BNM noted that while tariffs could weigh on global growth, Malaysia’s outlook remains resilient, supported by steady domestic demand, easing inflationary pressures, strong technology investment, and accommodative fiscal and monetary policies.

That said, downside risks persist, including the possibility of additional tariffs, escalating geopolitical tensions, and heightened volatility in global financial markets.

Inflation has remained low, particularly after the government scrapped plans to withdraw fuel subsidies for higher-income groups.

“For 2026, headline inflation is expected to stay moderate as global cost pressures continue to ease. Core inflation is projected to remain stable and close to its long-term average, reflecting sustained economic expansion without excessive demand-side pressures,” BNM said.

By holding rates steady, BNM retains room to respond more decisively should conditions deteriorate later this year. The government expects economic growth to slow to 4.0–4.5% in 2026, from 4.9% in 2025, amid rising external volatility. The fading impact of front-loaded demand and the potential introduction of new tariffs could weigh on export performance.

Malaysia’s average consumer price index (CPI) stood at 1.4% in 2025, the lowest level in five years. Inflationary pressures are forecast to remain within a 1.3–2.0% range in 2026, according to government estimates.