Malaysia Central Bank Hikes Rate Again By 25 Bps

(RTTNews) - Malaysia's central bank raised its key interest rate by a quarter-point for the second straight meeting on Wednesday and signaled a gradual tightening going forward.

The Monetary Policy Committee of Bank Negara Malaysia decided to increase the benchmark Overnight Policy Rate by 25 basis points to 2.25 percent.

The ceiling and floor rates of the corridor of the OPR were correspondingly increased to 2.50 percent and 2.00 percent, respectively.

The bank had previously lifted the rate by a quarter point in May, which was the first hike since January 2018.

At the current OPR level, the stance of monetary policy remains accommodative and supportive of economic growth, the bank said in a statement. Going forward, the bank said its monetary policy adjustment would be done in a measured and gradual manner.

With the economy on the mend but inflation still low, the policy rate will be raised by a further 50 basis points this year, Capital Economics Economist Gareth Leather said.

The bank expects domestic demand to support economic growth going forward as external demand is set to moderate amid headwinds to global growth. The bank sees a recovery in the tourism-related sectors after the reopening of international borders. Although inflation is projected to remain within the 2.2 percent to 3.2 percent range for the year, the headline rate may be higher in some months due mainly to the base effect from electricity prices.

The extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and the continued spare capacity in the economy, the bank said.