Consumer sentiment and share prices weakened following recent interest rate hike episodes.

PETALING JAYA: An increase in interest rates could potentially trigger a slowdown in consumer spending and put the brakes on the stock market, said a research house.

Kenanga Investment Bank sees Bank Negara Malaysia raising the overnight policy rate (OPR) in the first quarter of 2027, adding another headwind for discretionary spending and stocks.

It now expects a 25 basis points (0.25%) OPR normalisation to 3% in Q1 CY2027, reversing the “insurance” cut to 2.75% in July 2025.

“While this is viewed as a normalisation rather than the start of a tightening cycle, higher borrowing costs could temper discretionary and big-ticket spending.