BNM holds firm — but market says a rate cut is coming

Malay Mail

24-04-2025

Investors are betting on a rate cut by Bank Negara Malaysia due to weak economic growth and rising global trade tensions.
Malaysia's Q1 GDP growth fell short of expectations, prompting analysts to predict a potential 25-basis point interest rate cut by the end of 2025.
The rising demand for Malaysian government bonds signals growing confidence in a rate cut, which could boost borrowing and foreign investments.
KUALA LUMPUR, April 24 — Malaysia's bond market is rallying on rising expectations that Bank Negara Malaysia will ease interest rates amid trade tensions and a faltering growth outlook.
According to a Bloomberg report, ringgit swaps are pricing in 30 basis points of rate cuts over the next six months, doubling from earlier forecasts.
A recent three-year bond sale drew the strongest investor interest in over half a year, signalling a bullish bet on lower rates.
Analysts say such a move would ease borrowing costs and support capital markets during a period of global uncertainty.
'Ringgit rates market has increased dovish bets for BNM,' said Maybank Securities' head of fixed-income research Winson Phoon, who explained that the country's weaker GDP and global trade risks made a rate cut increasingly likely.
Malaysia's economic growth missed expectations in the first quarter, with GDP rising 4.4 per cent year-on-year.
Simultaneously, Malaysia's inflation cooled to 1.4 per cent in March, giving BNM more room to cut rates without sparking price concerns.
Malaysia's benchmark interest rate has been at 3.0 per cent since May 2023.
Major banks including Goldman Sachs and CIMB now forecast a 25-basis point cut by year-end.
Despite BNM's holdout stance, market sentiment suggests investors are positioning for a dovish pivot.
However, compared to the surge in foreign flows to Thai bonds, Malaysia's modest bond inflows signal a wait-and-see mood.