Strong Trade, Contained Inflation Offer BNM Policy Flexibility Despite Softer Credit - CIMB

KUALA LUMPUR, Dec 1 (Bernama) -- Malaysia’s credit cycle is showing a loss of momentum, but strong trade and contained inflation provide Bank Negara Malaysia (BNM) policy flexibility, according to CIMB Investment Bank Bhd.

It said the country’s credit cycle is moderating, with overall loan growth easing to 5.4 per cent year-on-year (y-o-y) in October 2025 from 5.5 per cent in September 2025 -- below 2024’s 5.9 per cent y-o-y pace and the first 10 months’ average of 5.3 per cent.

“Despite the softening credit pulse, other indicators suggest there is no urgency for BNM to cut rates soon,” the investment bank added in a note today.

CIMB pointed out that trade activity remains solid, with exports rising 15.7 per cent y-o-y in October and imports growing 11.2 per cent y-o-y.

“On the domestic front, inflation trends continue to provide policy flexibility: headline inflation averaged 1.4 per cent in the first nine months of 2025, with forecasts steady at 1.5 per cent for 2025 and 2.0 per cent for 2026,” it said. 

Given this still-firm domestic backdrop, CIMB forecast the Overnight Policy Rate (OPR) to remain at 2.75 per cent in the first quarter of 2026.

However, it said a clearer slowdown is likely to emerge externally, as softer demand from key trading partners weighs on Malaysia’s export outlook.

“In light of these dynamics, we expect a 25-basis point rate cut in the second quarter of 2026, most likely at the May Monetary Policy Committee meeting,” it added.

-- BERNAMA