Bank Negara (BNM) raised the overnight policy rate by 25bps to 2.25% at today’s meeting. This was contrary to the consensus expectation but in line with our forecast. Economic growth has recently surprised on the upside and will probably stay strong in coming quarters. But inflation is unlikely to be a problem and the risk that asset market bubbles develop is low. We therefore expect only a mild tightening. Rates will probably rise again in June and reach 2.75% by end-2010.