Malaysia central bank lifts key rate again to curb inflation

MALAYSIA'S central bank on Wednesday (Jul 6) raised its benchmark interest rate for the second straight meeting, as it looked to tame rising inflation while keeping an eye on unexpectedly weak global economic growth.

Bank Negara Malaysia (BNM) lifted its overnight policy rate by 25 basis points to 2.25 per cent, as expected by all 22 economists polled by Reuters.

It was the first rise at a consecutive BNM meeting in more than a decade.

BNM raised interest rates from a historical low of 1.75 per cent at its last meeting, in May.

The central bank said it had decided on a further adjustment after considering "positive growth prospects" for the Malaysian economy, including firmer domestic demand and a recovery in tourism following the reopening of borders.

"However, downside risks to growth continue to stem from a weaker-than-expected global growth, further escalation of geopolitical conflicts, and worsening supply chain disruptions," it said in a statement.

Headline consumer prices in 2022 were projected to be within its forecast range of 2.2 per cent to 3.3 per cent higher than a year earlier, but inflation may be higher in some months due to a low base effect from electricity prices, BNM said.

Inflation would remain partly contained by existing price controls, fuel subsidies and continued spare capacity in the economy, it said.

BNM said any further adjustments to interest rates would be measured and gradual. A slight majority of economists surveyed by Reuters forecast another rate hike in September, while others expected no change. REUTERS