Malaysia’s interest rate was held at 2.75% on November 6, 2025, matching the previous two readings in July and September. This marks a pause after a cut from 3.00% in March 2025, reflecting a cautious monetary stance amid evolving macroeconomic conditions. The decision aligns with the central bank’s aim to balance inflation control and growth support.

Drivers this month

• Stable core inflation at 2.90% YoY, down from 3.40% in Q2 2025.
• Moderate GDP growth forecast of 4.20% for 2025, slightly below 4.50% in 2024.
• External demand softening due to global trade tensions and slower China growth.

Policy pulse

The 2.75% rate remains below the pre-pandemic average of 3.25%, signaling a cautious but accommodative monetary policy stance. Inflation remains within the central bank’s 2–3% target band, reducing urgency for hikes.

Market lens

Financial markets reacted mildly: the MYR/USD pair appreciated 0.10% post-announcement, while 2-year government bond yields held steady near 3.10%. Breakeven inflation swaps suggest market inflation expectations remain anchored around 2.80%.

Core macroeconomic indicators underpin the interest rate decision. Inflation trends, GDP growth, and labor market data provide a comprehensive view of Malaysia’s economic health.

Inflation and growth trends

Consumer Price Index (CPI) inflation eased to 3.10% YoY in October 2025, down from 3.60% in July. Core inflation, excluding volatile food and energy, stabilized at 2.90%. This moderation follows a peak of 4.20% in early 2025. GDP growth projections for 2025 stand at 4.20%, a slight slowdown from 4.50% in 2024, reflecting weaker export demand and cautious domestic spending.

Labor market and fiscal stance

Unemployment remains low at 3.20%, near historic lows, supporting consumer confidence. Fiscal policy remains moderately expansionary, with the government targeting a 3.50% deficit of GDP in 2025, down from 4.00% in 2024. Public debt stands at 60% of GDP, manageable but limiting fiscal space for stimulus.

External environment

Malaysia faces external headwinds from slower global trade growth and geopolitical tensions in Southeast Asia. Commodity prices, especially palm oil and crude oil, have stabilized but remain volatile. The ringgit’s moderate strength supports import costs but pressures exporters.

Drivers this month

• Inflation deceleration from 4.20% in Q1 2025 to 3.10% in October.
• GDP growth steady at 4.20%, down from 4.70% in late 2024.
• Stable labor market supporting consumption.

Policy pulse

The interest rate pause reflects confidence in inflation containment without derailing growth. The central bank signals readiness to adjust if inflation deviates from the 2–3% target range.

Market lens

Immediate reaction: MYR/USD strengthened 0.10%, while 2-year yields remained flat at 3.10%. Inflation-linked bonds showed slight tightening, indicating anchored inflation expectations.

Looking ahead, Malaysia’s monetary policy faces a complex interplay of domestic and external factors. The central bank’s forward guidance emphasizes data dependency and flexibility.

Bullish scenario (30% probability)

• Global trade recovers, boosting exports and GDP growth above 4.50%.
• Inflation remains contained below 3%, allowing rate cuts in H2 2026.
• Fiscal consolidation supports investor confidence and ringgit strength.

Base scenario (50% probability)

• Growth stabilizes around 4.20%, inflation hovers near 3%.
• Interest rates remain at 2.75% through 2026 with minor adjustments.
• External risks persist but are manageable.

Bearish scenario (20% probability)

• Geopolitical tensions escalate, disrupting trade and investment.
• Inflation spikes above 4%, forcing rate hikes to 3.00% or higher.
• Fiscal pressures increase, weakening ringgit and financial conditions.

Policy pulse

The central bank’s cautious stance reflects balancing act between supporting growth and guarding against inflation resurgence. Forward guidance will likely emphasize flexibility amid global uncertainties.

Market lens

Market participants are pricing in a stable rate environment with moderate volatility. Inflation breakevens and bond yields suggest confidence in the base scenario but remain sensitive to external shocks.

Malaysia’s interest rate decision to hold at 2.75% reflects a steady macroeconomic backdrop with manageable inflation and moderate growth. The central bank’s data-driven approach balances domestic needs with external uncertainties. Fiscal discipline and geopolitical developments will be key to sustaining this equilibrium. Investors should monitor inflation trends, ringgit movements, and global trade dynamics closely.

Key Markets Likely to React to Interest Rate

The interest rate decision influences several key markets that track Malaysia’s monetary policy closely. The FBMKLCI index reflects domestic equity sentiment tied to economic growth and interest rates. The MYRUSD currency pair is sensitive to rate differentials and capital flows. The BTCUSD pair often reacts to global risk sentiment influenced by monetary policy. The AXJ ETF tracks Asian emerging markets, including Malaysia, and responds to regional rate shifts. Lastly, the USDMYR pair is a direct inverse of MYRUSD, providing alternative currency exposure.

FAQ

What is the current interest rate for Malaysia?

The current interest rate is 2.75%, unchanged since July 2025.

How does Malaysia’s interest rate affect inflation?

Interest rates influence borrowing costs, which in turn affect spending and inflation. The current rate aims to keep inflation within the 2–3% target.

What are the risks to Malaysia’s monetary policy outlook?

Risks include geopolitical tensions, global trade slowdowns, and unexpected inflation spikes that could prompt rate adjustments.

Key takeaway: Malaysia’s steady 2.75% interest rate reflects a balanced approach amid moderating inflation and cautious growth, with flexibility to respond to evolving risks.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 11/6/25