BNM continued to assess its monetary policy stance as supportive of the economy and consistent with its outlook for Malaysia’s growth and inflation. Policymakers remain sanguine about growth prospects. Drivers of growth will be broad-based, encompassing supportive household spending, robust private and public investment expansion, upbeat exports growth fuelled by the global tech upcycle and foreign tourist spending, with additional support from Budget 2025 policies. However, Trump 2.0 poses downside risks to this outlook given his protectionist stance via higher tariffs.
Average headline inflation was contained at 1.8% YoY in the first three quarters of 2024, close to the 10-year average of 2.0%. BNM expects inflation to remain manageable in 2025 due to easing global costs and the absence of excessive domestic demand pressures. However, both BNM and we see the risks as tilted to the upside due to domestic policy changes. In our view, the most notable policy uncertainty lies in the potential second-round price effects from the highly anticipated targeted RON95 fuel subsidies set to be implemented in mid-2025. While the MYR has pared back its year-to-date gains against the USD since October 2024, our expectations for a few more US Fed rate cuts should support the MYR. The MYR is also cushioned by BNM and the government’s ongoing joint efforts to repatriate foreign investment income and bolster foreign inflows from government-linked entities.
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