The Malaysian central bank raised its benchmark interest rate for a second straight meeting as it is seeking to tame inflation and said that future moves would be gradual to continue supporting economic growth.
Bank Negara Malaysia (BNM) increased the overnight policy rate by 25 basis points to 2.25 percent, a decision seen by 18 of the 19 economists surveyed by Bloomberg. One saw no change.
The move further rolls back part of the support implemented since 2020, putting the BNM 75 basis points away from restoring the policy rate to its pre-COVID-19 pandemic setting of 3 percent.
Photo: REUTERS
While it joined the Philippines in delivering back-to-back rate increases to blunt rising costs of living, Malaysia said the pace of withdrawal of stimulus measures would be tempered at the next meetings.
“Any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability,” the central bank said in a statement.
That stance is buoyed by headline inflation staying within the central bank’s forecast range of 2.2 to 3.2 percent for this year, with the core measure — which strips out volatile items such as food and fuel — expected to average 2 to 3 percent as seen earlier.
Malaysia’s main equities index pared losses to 1.1 percent after the decision, but is still headed for the lowest level in more than two years.
The ringgit continued to trade near its lowest level in more than three weeks, mirroring weakness in regional currencies, as worries over a recession boosted the US dollar.
BNM had previously projected economic growth this year to come in between 5.3 and 6.3 percent, thanks to a pickup in activity after the reopening of international borders in April, robust exports performance and improvement in retail spending.
However, downside risks to expansion continue to stem from weaker-than-expected global growth, further escalation of geopolitical conflicts and worsening supply chain disruptions, the central bank said.
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