CIMB: Bank Negara Malaysia may implement a preventive rate hike to 3.00% in March 2027

(1) CIMB economists Chew Khai Yen and Michelle Chia stated in a report that Bank Negara Malaysia may raise its policy interest rate by 25 basis points to 3.00% in March 2027 as a precautionary measure before a projected rebound in core inflation. (2) They previously anticipated that Bank Negara Malaysia would keep the rate at 2.75% until the end of the third quarter of 2027. (3) They estimate that the budget measures may increase household income by 1.15 billion ringgit, boosting the pace of consumption growth by 0.5 percentage points and GDP growth by 0.2 percentage points. (4) They noted that, amid rising cost pressures from the Middle East conflict and the impact of El Niño, increased spending and higher wage costs could provide businesses with greater scope to raise prices in the second half of 2027. (5) However, if price pressures intensify, an interest rate hike could come as early as January. (6) If domestic demand weakens, the interest rate hike could be delayed until May.