BANK Negara Malaysia (BNM) today raised the overnight policy rate (OPR) by 25 basis points to 3%, the first hike since November 2022.

This means monthly loan payments will increase for borrowers at a time when many are struggling with the high cost of living and inflation.

Earlier, a Reuters poll of 25 economists had largely expected BNM to hold its OPR at 2.75% for the third time.

BNM, in a statement, said the ceiling and floor rates of the OPR corridor are correspondingly increased to 3.25% and 2.75%, respectively.

It added that the global economy continues to be driven by resilient domestic demand supported by strong labour market conditions, and a stronger-than-expected rebound of China’s economy.

Nevertheless, the global economy continues to be weighed down by elevated cost pressures and higher interest rates.

“Headline inflation continued to moderate, but core inflation has persisted above historical averages. For most central banks, the monetary policy stance is likely to remain tight.

“For the Malaysian economy, latest developments point towards further expansion in economic activity in the first quarter of 2023 after the strong performance in 2022.

“While exports are expected to moderate, growth in 2023 will be driven by domestic demand. Household spending remains resilient, underpinned by better labour market conditions as unemployment continues to decline to pre-pandemic levels,” it said.

BNM also said both headline and core inflation are expected to moderate over the course of 2023, averaging between 2.8% and 3.8%.

“Existing price controls and fuel subsidies will continue to partly contain the extent of upward pressures to inflation. The balance of risk to the inflation outlook is tilted to the upside and remains highly subject to any changes to domestic policy including on subsidies and price controls, financial market developments, as well as global commodity prices,” it said. – May 3, 2023.