This would be the first time the OPR has dropped under 3% since March 2023.

BNM said the latest indicators pointed towards continued global growth thanks to consumer spending and front-loading activities, to some extent.

It said Malaysia’s economy was on a strong footing, but uncertainties involving developments outside the country could affect the nation’s growth prospects.

“The reduction in the OPR is therefore a pre-emptive measure aimed at preserving Malaysia’s steady growth path amid moderate inflation prospects.

“The MPC will continue to remain vigilant to ongoing developments and assess the balance of risks surrounding the outlook for domestic growth and inflation,” it said in a statement.

The central bank said global growth outlook was being weighed down by uncertainties surrounding “tariff developments” and geopolitical tensions, which could cause greater volatility in global financial markets and commodity prices.

It said the latest statistics pointed towards Malaysia’s economy continuing to grow in the second quarter of the year, driven by domestic demand and export growth.

It expects growth to continue to be supported by resilient domestic demand.

BNM also said employment and wage growth would support household spending, while expansion in investment activities would be sparked by the progress of multi-year projects, both public and private, as well as the realisation of approved investments.

“Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia’s export prospects.

“However, the balance of risks to the growth outlook remains tilted to the downside, stemming mainly from a slower global trade, weaker sentiment, as well as lower-than-expected commodity production,” it said.

BNM said headline and core inflation averaged at 1.4% and 1.9%, respectively, from January to May, while inflation is expected to remain moderate for the rest of the year.

“The ringgit’s performance will continue to be primarily driven by external factors, with favourable economic prospects, domestic structural reforms, and ongoing initiatives to encourage flows, to continue providing enduring support to the ringgit,” it said.