KUALA LUMPUR: Bank Negara Malaysia has decided to increase the Overnight Policy Rate (OPR) by 25 basis points (bps) to 2.50 per cent for the third consecutive time.
The ceiling and floor rates of the corridor of the OPR correspondingly increased to 2.75 per cent and 2.25 per cent, respectively.
The central bank said the global economy continued to expand, albeit slower, weighed down by rising cost pressures, tighter global financial conditions, and strict containment measures in China.
The central bank also noted that global growth continues to be supported by improvements in labour market conditions and the full reopening of most economies and international borders.
Inflationary pressures have remained high, due to elevated commodity prices and tight labour markets, despite continued easing in global supply chain conditions.
"Consequently, central banks are expected to continue adjusting their monetary policy settings, some at a faster pace, to reduce inflationary pressures.
"In particular, aggressive adjustments in the US interest rates have contributed to a strong US dollar environment.
"This has resulted in higher volatility in financial markets, affecting other major and emerging market currencies, including the ringgit.
"Going forward, the global growth is expected to face challenges from the impact of monetary policy tightening in most economies and pandemic management measures in China.
"The growth outlook is subject to downside risks, including elevated cost pressures, the potential energy crisis in Europe, and sharp tightening in financial market conditions," it said.
Meanwhile, Bank Negara said that headline inflation had averaged 2.8 per cent year-to-date.
Headline inflation is projected to peak in the third quarter (Q3) of 2022 before moderating after that, due to dissipating base effects and in line with the expected easing of global commodity prices.
"Underlying inflation, as measured by core inflation, is expected to average closer to the upper end of the 2.0-3.0 per cent forecast range in 2022, with some signs of demand-driven pressures amid the high-cost environment.
"The extent of upward pressures to inflation will remain partly contained by existing price controls, fuel subsidies, and the prevailing spare capacity in the economy," it said.
However, Bank Negara added that the inflation outlook continues to be subject to domestic policy measures, as well as global commodity price developments arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions.
"With the positive growth prospects for the Malaysian economy remaining intact, the Monetary Policy Committee (MPC) decided to adjust the degree of monetary accommodation further.
"At the current OPR level, the stance of monetary policy continues to remain accommodative and supportive of economic growth," it said.