KUALA LUMPUR: Malaysia's central bank unexpectedly raised its benchmark interest rate from a historical low on Wednesday, as rising commodity prices, strained supply chains and strong demand conditions fanned inflationary pressures.
Bank Negara Malaysia (BNM) raised its overnight policy rate to 2% from the record low of 1.75%. It was the first hike since July 2020, when rates were slashed to a historic low to combat the impact of the Covid-19 pandemic.
A Reuters poll of 18 economists had expected rates to remain unchanged this week, with the central bank likely to start tightening next quarter to avert rising inflationary pressures.
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BNM joins other central banks around the world in tightening monetary policy as the cost of everyday goods is pushed higher by supply chain problems and surging commodity prices.
"Inflationary pressures have increased sharply due to a rise in commodity prices, strained supply chains and strong demand conditions, particularly in the US," the central bank said in a statement.
With life returning to normal as the pandemic abates, the Malaysian economy is now on a "firmer footing", giving policymakers room to start tightening policy to head off inflation, it said.
Malaysia's headline inflation was 2.2% in March, lower than in many other countries, but food inflation jumped 4% and economists expect further increases.
Fears are growing that inflation could accelerate further worldwide as China's pandemic lockdowns heighten pressure on global supply chains and the Ukraine war pushes up commodity prices.
