In a note, it said inflation which is still benign, and a robust growth outlook suggest that BNM can afford to leave the OPR at its current level for a prolonged period.

“In line with our expectations, headline inflation edged lower to 1.8% year-on-year (y-o-y) in November from 1.9% in October.

“Moreover, both headline and core inflation averaged at 1.8% in the first eleven months of 2024 – comfortably below Malaysia’s 10-year average of 2%, indicating that inflation is still benign enough for the bank to hold the OPR,” it said.

It said barring the implementation of further domestic policy measures and global price shocks, inflation should average 1.8% in 2024 and 2.4% in 2025.

“The bank is aligned on this, having acknowledged that while inflation is ‘expected to remain manageable’ in 2025, its outlook remains subject to the details of the implementation of domestic policy measures.

“We believe this is directed at the removal of blanket subsidies for RON95 petrol announced at Budget 2025,” it noted.

At the same time, BMI also forecasted that the central bank will hold the OPR at the current 3% for the rest of the year on the back of a resilient growth outlook.

“The central bank has less to worry about on the economic front.

“Since its previous update, the bank’s confidence in the economy remains intact, citing ongoing investment projects which will boost exports and expand the productive capacity of the economy,” it added.

The research firm believed that BNM confidence is in line with the recent upward revisions of its 2024 and 2025 growth forecasts of 5% and 4.7%, respectively.

“Our forecasts are broadly in line with policymakers’ recent upward revision to the 2024 real gross domestic product (GDP) growth forecast to 4.8%-5.3% (4%-5% previously) and sits towards the upper end of the government’s 2025 real GDP growth target of 4%-5%.

“Regardless, Malaysia’s resilient growth outlook suggests that the bank can leave interest rates unchanged to preserve policy space, instead of acting in the event of a negative shock to the economy,” it added.