Malaysia's central bank raises overnight interest rate by 25 bps to 3%

By Angela McDaniels

Tacoma, Wash., May 5 - The Monetary Policy Committee of Bank Negara Malaysia, Malaysia's central bank, raised its Overnight Policy Rate by 25 basis points to 3% at its meeting on Thursday, according to a statement from the bank.

The committee said that despite some moderation, economic growth in the region has remained strong.

Domestic headline inflation has continued to increase. It rose to 3% in March, bringing the average for the first quarter to 2.8%. The committee attributed the increase mainly to higher food and fuel prices.

Going forward, the committee's assessment is that the Malaysian economy will continue to grow and that growth will be underpinned by expansion of domestic demand and strong demand for commodities.

The committee said global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year, according to the statement.

With the economy "firmly on a steady growth path," the committee decided to adjust the degree of monetary accommodation.

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