KUALA LUMPUR - Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 2.75 per cent through 2026 on contained inflation and resilient domestic growth, said Kenanga Investment Bank Bhd (Kenanga IB).
Kenanga IB said in a note that with softer price pressures, inflation would average around 2.1 per cent in 2026, though Strait of Hormuz disruptions remain an upside risk via imported fuel, fertiliser and logistics costs.
"Resilient domestic demand, growth tracking towards the upper end of our 4.5 per cent-5.0 per cent forecast range and contained underlying inflation should let BNM hold the OPR at 2.75 per cent through 2026.
"We expect policy stability to stay the priority, with supply-driven inflation, a relatively resilient ringgit and ample policy space allowing BNM to look through temporary shocks,” it said.
The investment bank also held its constructive medium-term outlook on the ringgit, forecasting the local currency to strengthen to RM3.95 against the US dollar by end-2026 and RM3.90 by end-2027.
It said this is supported less by the expected path of the US Federal Reserve’s monetary policy and more by a broader softening trend in the greenback.
Domestic fundamentals remain supportive, with foreign currency deposits hitting a record RM316 billion in May, pointing to sizeable latent conversion potential into the ringgit over time, it noted.
Kenanga IB said that while recent incidents show the West Asia ceasefire remains fragile, both sides retain incentives to preserve it and expect intermittent violations to continue without derailing the broader framework. - BERNAMA