Malaysia Central Bank Raises Rate By 25 Bps

(RTTNews) - Malaysia's central bank raised its benchmark rate by a quarter-point for the fourth straight meeting, on Thursday.

The Monetary Policy Committee of Bank Negara Malaysia decided to hike the Overnight Policy Rate by 25 basis points to 2.75 percent.

The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 3.00 percent and 2.50 percent, respectively.

This was the fourth consecutive rate hike in the current tightening cycle that started in May 2022.

The MPC said the current stance of monetary policy remains accommodative and supportive of economic growth. Any adjustments to the monetary policy settings going forward would continue to be done in a measured and gradual manner, the bank said.

Domestic demand will remain the key driver of economic growth, policymakers observed. External demand is forecast to moderate following softening global growth.

However, the bank noted that downside risks to the domestic economy continue to stem from a weaker-than-expected global growth, higher risk aversion in global financial markets amid more aggressive monetary policy tightening in major economies, further escalation of geopolitical tensions, and supply chain disruptions.

In September, consumer price inflation eased for the first time in six months, to 4.5 percent from 4.7 percent.

Although inflation peaked in the third quarter of 2022, headline and core inflation are expected to remain elevated next year.

Inflation and currency weakness are the two major concerns for the central bank, Capital Economics economist Shivaan Tandon said. But those concerns will ease next year.

The economist expects one more quarter point rate hike in early 2023, but with growth slowing and inflation set to fall back further, this will mark the end of the tightening cycle. The rates will remain on hold for the remainder of the year.