Malaysian Monetary Policy Tightened Slightly Further

May 13, 2010

Bank Negara Malaysia implemented its second overnight policy rate hike of 25 basis points today.  The first move was on March 4.  Three cuts earlier cuts were made of 25 bps in November 2008, 75 bps in January 2009 and 50 bps to 2.0% on February 24, 2009.  Malaysia has an enviable combination of strong growth and moderate inflation, which are touted in a statement released by central bank authorities today.  Real GDP growth accelerated to an on-year pace of 10.1% in 1Q10 from 4.5% in 4Q09, and CPI inflation was only at 1.3% on year in March and unlikely to surpass 2.0% this year.  Growth is coming from both domestic sources and exports.  As in the March statement, today’s calls policy still “accommodative” and supportive of growth, and characterizes today’s move as a further “normalization” of policy.  The 25-bp size of the increase matched market expectations.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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