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Malaysia
AsiaSoutheast Asia

In surprise move, Malaysia raises benchmark interest rate to 3 per cent

  • Bank Negara Malaysia lifted its overnight policy rate by 25 basis point on Wednesday, citing a need to manage persistent inflation
  • The central bank had kept rates unchanged at its two previous meetings this year, as it sought to assess the impact of four increases in 2022

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Bank Negara Malaysia, the Southeast Asian nation’s central bank, in Kuala Lumpur. Photo: Reuters
Reuters
Malaysia’s central bank unexpectedly raised its benchmark interest rate on Wednesday, citing a need to normalise monetary accommodation as the economy was resilient and it needed to manage persistent inflation.
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Bank Negara Malaysia (BNM) lifted its overnight policy rate by 25 basis points to 3 per cent. A Reuters poll of 25 economists had largely expected Bank Negara Malaysia to hold its overnight policy rate at 2.75 per cent, with just four forecasting a rate increase.

BNM had kept rates unchanged at its two previous meetings this year, as it sought to assess the impact of four consecutive increases totalling 100 basis points in 2022.

People shop at a market in Kuala Lumpur last month. Malaysia’s economy bounced back strongly last year, with growth hitting 8.7 per cent. Photo: EPA-EFE
People shop at a market in Kuala Lumpur last month. Malaysia’s economy bounced back strongly last year, with growth hitting 8.7 per cent. Photo: EPA-EFE
The Southeast Asian economy has bounced back strongly from a pandemic-induced slump, with growth hitting a 22-year high of 8.7 per cent in 2022, but slowing global demand has clouded the outlook for its exports of energy, commodities and high tech goods.

BNM said in a statement that latest developments point towards further expansion in economic activity in the first quarter of 2023, driven by strong domestic demand, household spending and better labour market conditions.

While inflation was expected to moderate, core inflation would remain at elevated levels amid firm demand conditions, it said.

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“With the domestic growth prospects remaining resilient, the MPC judges that it is timely to further normalise the degree of monetary accommodation,” the central bank said, referring to its monetary policy committee.

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