Malaysians' questions were finally answered when the Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) meeting on July 6, confirmed the rate hike for the second time in a row this year.
It indirectly met the expectations of some analysts who predicted a surge by the central bank based on the situation of peaking inflation around the world.
According to an official statement from BNM, the Overnight Policy Rate (OPR) was raised by 25 basis points at 2.25% with ceiling and floor levels increasing at 2.50% and 2% respectively.
Among the factors outlined behind the increase were inflationary pressures stemming from rising commodity prices and strong demand conditions behind the global supply chain problems.
Rising cost pressures, the conflict in Russia and tight containment measures in China have also exacerbated the situation despite the reopening of the economy boosting the labor market.
Meanwhile, Malaysia's economic activity has remained strong in recent months with export indicators and retail spending experiencing positive growth momentum.
The labor market also saw the unemployment rate continue to decline with labor participation soaring and income prospects improving.
Although external demand is expected to moderate due to weak global growth, domestic demand is expected to remain strong.
However, downside risks to growth remain strong as global growth remains slow and supply chain disruptions worsen.
On the other hand, core inflation has averaged 2.4% although it is projected to remain in the projected range of 2.2% to 3.2% while core inflation is projected to be in the 2% -3% level in 2022 due to increased demand in a high cost environment.
Ijmal from the statement, the MPC will continue to assess the situation against any changes and the implications of the overall outlook on inflation as well as domestic growth.
And at the current OPR level, the stance of monetary policy is said to remain accommodative and will help support economic growth.
