Malaysia unexpectedly hikes interest rate to tame inflation
- Bank Negara Malaysia increased the overnight policy rate by 25 basis points to 2 per cent to ease inflationary pressures
- The move makes Malaysia the latest to join the policy tightening bandwagon, as central banks across the world try to fight inflation stoked in part by supply chain snarls
Bank Negara Malaysia (BNM) increased the overnight policy rate by 25 basis points to 2 per cent, a move seen by only five of the 19 economists surveyed by Bloomberg. The rest had predicted no change.
While headline inflation at 2.2 per cent has stayed benign and is the lowest rate in Southeast Asia, core inflation, which strips out volatile food and fuel costs, rose 2 per cent in March from a year ago – a level last seen in August 2019. Food inflation jumped 4 per cent year-on-year, the most since December 2017.
Malaysia’s ringgit climbed as much as 0.2 per cent to 4.3760 versus the US dollar after the decision, which most economists were expecting only by the second half of the year. The yields on three-year government bonds, which are more sensitive to rate expectations, were broadly steady at 3.78 per cent, erasing a loss of 3 basis points that followed the unexpected move.
