KUALA LUMPUR: A potential 25-basis-point hike in the Overnight Policy Rate (OPR) to 3.0 per cent is expected in the first quarter of 2027 (1Q 2027), amid resilient economic growth and Bank Negara Malaysia’s (BNM) hawkish stance on inflation, said market observers.
Kenanga Investment Bank Bhd expects BNM to deliver a single 25-basis-point hike to 3.0 per cent in 1Q 2027 before keeping the rate unchanged.
The investment bank said that with most major central banks tightening monetary policy, an unchanged OPR risked widening interest rate differentials, adding pressure on the ringgit, while a modest pickup in inflation in 2027 would erode the real OPR.
It added that inflation remained benign at 1.8 per cent in September, but persistent geopolitical tensions warranted a measured shift towards more neutral monetary policy settings.
“That said, BNM is likely to retain a data-dependent approach and will assess the evolution of inflationary pressures before proceeding with any policy adjustment,” the investment bank said in a research note today.
On Thursday, BNM’s Monetary Policy Committee (MPC) kept the OPR at 2.75 per cent at its sixth and final meeting of the year.
Kenanga Investment Bank maintained its 2026 gross domestic product (GDP) growth forecast at 5.3 per cent, up from 5.2 per cent in 2025, backed by resilient domestic demand, robust services and sustained investment in artificial intelligence (AI) and digital infrastructure.
It added that demand for electrical and electronics products driven by AI and data centre expansion should continue to support manufacturing, while tourism would provide a further boost.
Growth should moderate in 4Q 2026 as front-loading fades and trade momentum normalises, said the investment bank.
“Still, firm labour market conditions and continued investment should cushion external headwinds. Looking ahead, we maintain our GDP growth forecast at 5.0 per cent in 2027. The high 2026 base and slower manufacturing point to softer momentum in 2027, but domestic fundamentals remain supportive,” it added.
Meanwhile, Apex Securities Bhd expects a 25-basis-point hike to 3.0 per cent in January 2027, bringing forward its previous forecast of a hike in 2Q 2027, as it sees little reason for the central bank to wait given that the key hurdle to a hike has eased.
The case for a rate hike is strengthening, with 3Q 2026 growth exceeding expectations at 5.3 per cent and year-to-date growth expected to reach 5.5 per cent, it said.
It noted that BNM appeared increasingly comfortable that the economy was adapting well to supply constraints arising from geopolitical tensions. Potential cost pass-through to consumers could also prompt BNM to act earlier to contain the risk of second-round inflationary effects.
“BNM could alternatively wait until March to assess the growth momentum in 1Q 2027, but we think an earlier move in January is more likely given the shift in the balance of risks,” it added.
Apex Securities also said concerns over geopolitical tensions were easing, adding that BNM had adopted a more hawkish stance on inflation, citing the risk of higher commodity prices being passed on to consumers.
