In a surprise move, Bank Negara Malaysia (BNM) announced its first interest rate hike of the year, raising the Overnight Policy Rate (OPR) by 25 basis points to 3%. This comes after the central bank held off on raising interest rates in its January 19 and March 19 meetings, maintaining the rate at 2.75%.
BNM increases OPR by 25 basis points
Prior to the announcement, the market widely expected BNM to maintain the interest rate at 2.75%. According to a Bloomberg survey of 19 economists, 16 of them believed that the central bank would maintain the current rate.
However, United Overseas Bank, Bank of America, and Standard Chartered Bank predicted a 25 basis point increase to 3%.
The unexpected decision to raise interest rates signals BNM’s confidence in Malaysia’s economic recovery and its commitment to maintaining financial stability.
Monetary stimulus withdrawn
“With the domestic growth prospects remaining resilient, the MPC judges that it is timely to further normalise the degree of monetary accommodation.”
“With this decision, the MPC has withdrawn the monetary stimulus intended to address the COVID-19 crisis in promoting economic recovery. In light of the continued strength of the Malaysian economy, the MPC also recognises the need to ensure that the stance of monetary policy is appropriate to prevent the risk of future financial imbalances.”
“At the current level, the monetary policy stance is slightly accommodative and remains supportive of the economy. The MPC will continue to ensure that the monetary policy stance remains consistent with the outlook of domestic inflation and growth.”
Read the statement here.Read more: Bank Negara Increases OPR To 3%