Malaysia set for sustained but gradual tightening

Bank Negara (BNM) today raised the overnight policy rate by 25bp to 2.5%, as expected, while the double-digit surge in GDP in Q1 has been confirmed. The economic upswing looks set to remain strong and BNM needs to tighten further to ensure that inflation stays contained. We expect that rates will move up 25bp every quarter, to a peak of 3.5% in mid-2011.

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