KUCHING: Bank Negara Malaysia (BNM) revealed that the Overnight Policy Rate (OPR) will remain at 2.75 per cent as the Middle East conflict raises downside risks and market volatility.
Building on the strengths of 2025, Bank Negara Malaysia’s Monetary Policy Committee said global growth is expected to continue to be supported by sustained domestic demand, moderate inflation, robust tech investments, and supportive fiscal and monetary policies.
“However, the recent conflict in the Middle East has raised uncertainty in the global economy, with the impact depending on the length and severity of the conflict.”
It said downside risks have risen, arising from further escalation in geopolitical tensions and heightened volatility in global financial markets, alongside continued concerns over potentially higher tariffs and elevated valuations in financial markets.
It added that upside potential includes stronger tech spending, a milder tariff impact on economic activity, and pro-growth policy measures in key economies.
“The Malaysian economy grew by 5.2 per cent in 2025, driven by strong domestic demand, higher electrical and electronics (E&E) exports and robust inbound tourism, and this growth momentum is expected to continue in 2026, anchored by resilient domestic demand. “
It said employment, wage growth and policy measures will remain supportive of household spending.
“Investment activity will be driven by the progress of multi-year projects in both the private and public sectors, implementation of new smaller-scale public projects, continued high realisation of approved investments, as well as the ongoing implementation of national master plans.
“The external sector will benefit from continued strength in E&E exports and higher tourist spending, although the growth outlook remains subject to uncertainties surrounding global developments, including the recent conflict in the Middle East.”
It noted that downside risks remain unchanged from slower global trade and lower-than-expected commodity production.
The committee concurred that upside potential to growth could arise from a better global growth outlook, stronger demand for electrical and electronics goods, and more robust tourism activity.
“Headline and core inflation stood at 1.6 per cent and 2.3 per cent, respectively, in January 2026, and headline inflation in 2026 is expected to remain moderate.
“While global commodity prices may be subject to greater volatility given recent developments, the impact on domestic inflation is expected to be contained, while core inflation in 2026 is expected to remain stable and close to its long-term average.
“This reflects continued expansion in economic activity and the absence of excessive demand pressures.”
The committee also acknowledged uncertainties from the ongoing conflict in the Middle East, saying the impact on the global and Malaysian economy will depend on how these developments evolve.
“Malaysia is facing these challenges from a position of strength, with robust domestic growth, moderate inflation, a sound financial sector and a resilient external position.
“At the current OPR level, the monetary policy stance is appropriate and supportive of the economy amid price stability.
“The committee will continue to monitor ongoing developments and assess the balance of risks surrounding the outlook for domestic growth and inflation,” it said.
