US tariffs may prompt interest rate cut in Malaysia: BNM could slash OPR by 25 basis points - Economist

SHAH ALAM - Global economic headwinds, spurred by renewed United States (US) tariff policies, are likely to influence Malaysia’s interest rate trajectory in the next six to 12 months.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said there was a real possibility that Bank Negara Malaysia (BNM) might reduce its policy rate by 25 basis points to help support the economy.

He said such a move was aimed at cushioning the domestic economy by encouraging both household and business spending.

"There is a possibility that BNM might reduce its policy rate by 25 basis points to help support the economy.

"A rate cut would aim to encourage spending and investment, both from households and businesses, thereby stimulating economic activity," he told Sinar Daily.

He said a rate reduction would also provide immediate relief to borrowers, especially those with floating-rate loans, by reducing their monthly repayments.

Afzanizam also highlighted that this would increase disposable income, allowing for greater spending on other needs, which would in turn help drive positive economic momentum.

Despite potential changes in interest rates, he said Malaysian banks were likely to maintain their current credit standards.

He believed it was unlikely that banks will impose stricter credit approvals or adjust their lending policies as a response to the US-imposed tariffs.

"Malaysian banks are unlikely to significantly alter their credit policies.

"Banks in Malaysia are heavily regulated by BNM, adhering to strict credit underwriting standards.

"Loan applications are assessed based on the applicant’s credit history and repayment capacity," he said.

As such, the approval process remained consistent, with loan eligibility determined by the applicant's ability to meet repayment obligations, irrespective of broader economic shifts, he added.