M'sia raises key rate for 1st time in 4 years

Malaysia’s central bank on Thursday raised its key interest rate for the first time in almost four years after the economy emerged out of recession.

Bank Negara said the overnight policy rate (OPR) has been raised by 25 basis points to 2.25 per cent. It last raised rates in late 2005.

One economist said banks are expected to increase their lending rates as a result.

“The domestic economy has since improved significantly and is now on a path of recovery,” the central bank said in a statement.

“Given this improved economic outlook, the Monetary Policy Committee decided to adjust the OPR towards normalising monetary conditions and preventing the risk of financial imbalances that could undermine the economy recovery process.”

The OPR is the main interest rate which banks use to benchmark their own lending rate.

The bank said inflation was expected to remain moderate in 2010, despite the risk that higher global commodity and food prices may exert some additional upward pressure on domestic prices.

Prime Minister Datuk Seri Najib Razak said last month Malaysia’s economy has recovered from the global crisis and could expand by 5.0 percent this year.

The economy grew by 4.5 per cent in the three months to December, rebounding after three consecutive quarters of contraction. - AFP