Bank Negara Malaysia lowered its overnight policy rate by 25 basis points to 2.75% on Wednesday, its first reduction since July 2020 and the first policy easing in five years. The ceiling and floor of the policy corridor were cut to 3% and 2.5% respectively, matching economists’ median forecast in a Reuters survey where 17 of 31 respondents expected a quarter-point move. The central bank described the step as a pre-emptive measure to preserve growth momentum amid subdued price pressures. Headline inflation averaged 1.4% between January and May, with core inflation at 1.9%, and the bank projects 2025 headline inflation at 2%–3.5%. Malaysia’s economy expanded 4.4% in the first quarter but officials have already signalled this year’s 4.5%–5.5% growth target may be out of reach. External risks have intensified after U.S. President Donald Trump unveiled a 25% tariff on Malaysian exports to the United States on Tuesday. Bank Negara said escalating trade tensions and geopolitical uncertainty could heighten financial-market volatility and weigh on commodity prices, reinforcing the case for early policy support. Analysts anticipate the new rate will stay in place through at least 2026 unless global conditions deteriorate further.