Malaysia's BNM: Mindful of risks of prolonged Mideast conflict

Malaysia’s central bank, Bank Negara Malaysia (BNM), has maintained the Overnight Policy Rate (OPR) at 2.75% amid heightened global uncertainty from the escalating Middle East conflict, which threatens to disrupt oil markets and financial stability according to BNM. The decision, aligned with expectations from economists, reflects BNM’s cautious approach as it monitors potential spillovers from prolonged geopolitical tensions, including surging crude oil prices and currency volatility. Crude oil prices have risen sharply, exceeding $80 per barrel within five days of the conflict’s onset, while the ringgit faced increased pressure, closing at 3.9415/9480 on March 6.

Despite these risks, BNM Governor Datuk Seri Abdul Rasheed Ghaffour emphasized Malaysia’s strong economic fundamentals, including robust domestic demand, moderate inflation (1.6% headline in January 2026), and a resilient external sector according to BNM. The economy grew 5.2% in 2025, driven by electrical and electronics (E&E) exports, tourism, and sustained investment in multi-year projects according to Devere. BNM noted that the stronger ringgit and targeted subsidies have partially offset inflationary pressures from higher energy costs according to BNM.

Looking ahead, the central bank will continue assessing global and domestic risks, including supply chain disruptions and U.S. tariff threats, while prioritizing reforms to sustain growth according to Financial Post. BNM’s Monetary Policy Committee stressed that the current policy stance remains supportive of price stability and economic expansion, with no immediate rate adjustments anticipated in 2026 according to Devere.