KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has maintained expectations for Bank Negara Malaysia (BNM) to lower the overnight policy rate (OPR) by 25 basis points (bps) to 2.75 per cent in the second quarter of 2025 (2H 2025), if economic conditions warrant.
Key factors to be monitored include the United States (US) upcoming economic data releases such as May inflation on June 27, US June nonfarm payroll (July 3) and Malaysia’s May trade release (June 20).
“Malaysia-US tariff negotiation developments, set to conclude by July 9, and geopolitical tension escalation in the Middle East also must be monitored,” it said in a research note.
It was reported that the US Federal Reserve (Fed) has maintained its interest rate at 4.25 to 4.50 per cent for the fourth consecutive meeting.
The Fed reiterated that it is awaiting further information on the extent of tariff pass-through, while noting that the labour market remains relatively stable.
HLIB said while the Fed has downgraded its growth forecast, it has raised its inflation projection.
“Reflecting these mixed signals, the median forecast for two cuts (50 bps) was unchanged.
“However, a closer look at the individual dot plot reveals a more cautious stance,” it said.
Citing data from the Federal Open Market Committee (FOMC), HLIB said the FOMC has observed recent indicators pointing to continued solid growth in US economic activity.
Unemployment remains low, labour market conditions remain solid, but inflation stays somewhat elevated, HLIB said.
“The committee seeks to achieve maximum employment and inflation at the 2.0 per cent rate over the longer run.
“In considering the extent and timing of additional adjustments to the target range for the Fed funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks, and will continue to reduce its holdings of treasury securities and agency debt and agency mortgage-backed securities,” it said.– BERNAMA
