Malaysia Gets a Third Interest Rate Hike

July 8, 2010

Following up on similar moves announced March 4 and May 13, Bank Negara Malyasia hiked its overnight policy rate by 25 basis points to 2.75%.  In doing this, the central bank has now reversed half the easing that was done from November 2008 through February 2009.

The latest Malaysian central bank statement is more dovish than the previous two.  Policy is still called accommodative and supportive of growth.  However, instead of framing today’s move as part of the normalization of rates, today’s statement asserts that the key rate is now appropriate in the context of growth and inflation forecasts.  The statement observes that global financial markets have become more volatile and identifies an enhanced risk that global growth could moderate.  On the domestic economy, officials said that domestic demand remains robust and that consumption, investment, and government spending are all helping.  CPI inflation was at 1.6% in the year to May and is expected to remain moderate into 2011.

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



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