The Central Bank of Malaysia has hiked the key interest rate by a further 25 basis points to 2.50% in a bid to curb soaring inflation.

The bank’s monetary policy committee has increased rates for three consecutive meetings since May, amounting to 75 basis points. This is the first time Malaysia has implemented three consecutive rate rises in more than a decade.

Ahead of this latest meeting, 19 out of 20 economists surveyed by Reuters predicted the 25-basis point hike, with one forecasting a 50-basis point rise.

"With the positive growth prospects for the Malaysian economy remaining intact, the [monetary policy committee] decided to further adjust the degree of monetary accommodation," the central bank stated.

In addition, United Overseas Bank’s Julia Goh and Loke Siew Ting forecast this latest rate rise, saying it was down to a strong economic performance in Q2 and mounting inflation.

"Besides internal factors, we believe the expected outsized U.S. Fed rate hikes in the coming months and global monetary conditions would also be taken into consideration by the central bank at the September meeting," they commented.

Rising food prices in August drove Malaysia’s inflation to a 14-month high, with the consumer price index up 4.4% year-on-year, over the central bank’s forecast of 2% to 3%.

During a media briefing back in May, central bank governor Nor Shamsiah Mohd Yunus conveyed the bank’s readiness to revise the rate, taking into account the post-pandemic economic recovery.

"It is important for us to start recalibrating interest rates now, rather than [making] an aggressive move at a later point," she said. "The OPR [overnight policy rate] has to be recalibrated with the realities on the ground, where the economy is now on firmer ground and monetary policy is sound."

However, the governor didn’t specify whether the interest rate would revert to the pre-pandemic figure of 3.00% by the end of the year.

"Any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability," said the central bank statement.