Shah Alam – Bank Negara Malaysia’s (BNM) Monetary Policy Committee announced an increase in the overnight policy rate (OPR) by 25 basis points to 2.25 per cent.
This comes as food prices continue to spike upwards.
The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.50 percent and 2.00 percent, it said in a statement.
It further said the reopening of the global economy and the improvement in labour market conditions continued to support the recovery of economy activity.
"However, these have been partly offset by the impact from rising cost pressures, the military conflict in Ukraine and strict containment measures in China.
"Inflationary pressures have continued to increase mainly due to elevated commodity prices and strong demand conditions, despite some easing in global supply chain conditions.
"Consequently, central banks are expected to continue adjusting their monetary policy settings, some at a faster pace, to reduce inflationary pressure,” it said.
The central bank further said the pace of global growth is expected to be moderate and will continue to be affected by the elevated cost pressures, conflict in Ukraine, global supply chain conditions and financial market volatility.
Moving on to the Malaysian economy, BNM says the economic activity has been strengthening in recent months.
Meanwhile, the transition to the endemic phase has also supported the positive growth in retail exports and spending indicators.
"Looking ahead, while external demand is expected to be moderate, weighed by headwinds to global growth, economic growth will be supported by domestic demand,” BNM explained.
It further said the reopening of international borders since April 1 2022 would facilitate the recovery in tourism-related sectors.
Nevertheless, BNM advised the downside risks due to weaker-than-expected global growth, further escalation of geopolitical conflicts and worsening supply chain disruptions.