Malaysia raises key interest rate for the first time in four years

Malaysia's central bank—Bank Negara Malaysia—raised on Thursday its key interest rate for the first time in four years ahead of general elections due by August.

The central bank increases the overnight policy rate by 25 basis points to 3.25% . The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 3% and 3.5% respectively.

The central bank last hiked the interest rate in July 2014,  but drop it to 3% shortly after the Brexit vote in the U.K.

“The global economy has strengthened further, with growth becoming more entrenched and synchronized across the region,” said the central bank in a statement. “In Asia, growth is driven by sustained domestic activity and strong external demand while globally financial markets have remained stable.”

The Malaysia government predicts 5.5% of economic growth this year and a strengthening Ringgit.

The central bank also estimated that the headline inflation will average lower this year—compared to 3.7% in 2017, on expectations of a smaller effect from global cost factors.

 

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