BNM may raise rates if growth holds, oil fuels inflation — MARC
KUALA LUMPUR (July 20): Bank Negara Malaysia (BNM) could eventually consider reversing last year’s interest rate cut if Malaysia’s strong economic growth persists and higher oil prices add to inflationary pressure,…
Source: The Edge Malaysia · July 21, 2026 at 6:45 PM · AI-assisted report
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KUALA LUMPUR, 22 JULY 2026 —
BNM May Reassess Rate Cut as Growth, Oil Prices Fuel Inflation — MARC
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KUALA LUMPUR (July 21): Bank Negara Malaysia (BNM) may revisit last year’s interest rate cut if Malaysia’s robust economic growth continues and elevated oil prices sustain inflationary pressures, according to MARC Ratings.
In a note released on Monday, MARC maintained its baseline expectation that the overnight policy rate (OPR) will remain unchanged. However, it warned that persistent geopolitical risks could keep oil prices high, while strong GDP growth may eventually warrant a return to the OPR level before the pre-emptive cut in July 2025.
“On the monetary policy front, MARC’s baseline expectation is for the OPR to remain unchanged,” the ratings agency said. “However, ongoing geopolitical risks could keep oil prices elevated and pressure inflation. Additionally, amid strong GDP growth, a reversion to the OPR level that prevailed before the July 2025 pre-emptive rate cut may be considered over time.”
MARC raised its 2026 GDP growth forecast for Malaysia to 5.1% from 4.4%, citing strong first-half performance. The upward revision reflects expectations of accelerated supply-chain investments, infrastructure development, stronger tourism, and resilient private consumption. The agency also noted support from hydrocarbon exports, foreign direct investment, and semiconductor and AI-related investments.
On the currency front, MARC adjusted its end-2026 ringgit forecast to between 4.00 and 4.15 against the US dollar, up from the previous range of 3.98 to 4.07. The revision follows expectations that US interest rates will stay higher for longer, widening the yield differential between Malaysian government bonds and US Treasuries. While this could limit the ringgit’s gains, record exports and continued foreign investment inflows are expected to provide support.
MARC also anticipates sustained foreign bond inflows into Malaysia in the second half of 2026, though a more hawkish US Federal Reserve could temper the pace. Malaysian Government Securities yields are projected to remain broadly stable at 3.6% to 3.7% by year-end, even as regional bond yields trend upward amid inflation and tighter monetary policy expectations.
Related: BNM