BNM may cut OPR by 25bps in July amid economic uncertainties

BANK Negara Malaysia (BNM) is expected to reduce the overnight policy rate (OPR) to 2.75 per cent as early as July this year due to growing concerns over slower economic growth triggered by new US reciprocal tariffs, according to CIMB Securities Sdn Bhd,

The firm indicated that BNM could consider easing the rate to support domestic demand if economic conditions worsen further.

“The risk of additional monetary easing remains on the table, particularly if global headwinds—stemming from a sharper-than-expected slowdown in the US or a broader weakness in external demand—intensify and weigh on Malaysia’s growth momentum,” CIMB Securities said in a note on Thursday.

The firm also revised its OPR forecast to reflect a 25-basis point cut, lowering the policy rate to 2.75 per cent in 2025. This marks a shift from its earlier expectation of holding the rate at 3 per cent.

The announcement of new tariffs by US President Donald Trump on Thursday has fuelled widespread fears of an impending global recession.

While the tariff rate imposed on Malaysia is lower than those affecting several other Asian countries, it still represents a significant challenge for the nation's economy.

The tariffs on Malaysia are less severe than those on Cambodia (49 per cent), Laos (48 per cent), Vietnam (46 per cent), Myanmar (44 per cent), Thailand (36 per cent), China (34 per cent), Taiwan (32 per cent), Indonesia (32 per cent), and South Korea (25 per cent), but higher than those on the European Union (20 per cent), the Philippines (17 per cent), and other countries with tariffs of at least 10 per cent, including Singapore, the UK, Australia, and Brunei.

CIMB Securities warned that the tariffs, combined with a deceleration of the US economy—growing at just 2.5 per cent in the fourth quarter of 2024—present a dual challenge for export-driven economies in Asia.

Malaysia, which is highly exposed to US tariffs and dependent on exports, could face significant disruptions.

“Substitution effects and demand erosion present first-order shocks to export-oriented economies, including Malaysia and Thailand,” the firm stated.

“While Indonesia is more insulated, it faces downside risks as second-order effects from weakening demand in key markets like the US and China dampen growth momentum.”

In light of these developments, CIMB Securities has also revised Malaysia’s GDP growth forecast for 2025, lowering it to 4.0 per cent from the previous 5.0 per cent. – April 4, 2025