Malaysia's economy expanded by 4.5% annually in the second quarter of 2025, surpassing expectations and reducing the likelihood of further interest rate cuts by Bank Negara Malaysia, Bank of America said.

The forecasted growth suggests full-year 2025 GDP is likely to remain above 4%, with economists projecting growth of 4.4% in 2025 and 4.2% in 2026.

The stronger growth means the economy is running above expectations, so the central bank may not need to cut rates again in 2025. However, if economic conditions worsen, a 25-basis-point rate cut can be considered in the first half of 2026.