Malaysian Central Bank, Bank Negara Malaysia unexpectedly raised its benchmark interest rate on Wednesday, citing the need to normalise monetary easing due to the economy’s resilience and the need to manage persistent inflation.

Bank Negara Malaysia (BNM) raised the overnight policy rate by 25 basis points to 3%. Bank Negara Malaysia kept its overnight policy rate at 2.75%, with only four forecasting a rate hike, according to a Reuters poll of 25 economists.

Bank Negara left rates unchanged at its first two meetings this year as it tries to assess the impact of four consecutive hikes totalling 100 basis points in 2022.

Southeast Asia’s economy has bounced back strongly from the pandemic-induced recession, growing at a 22-year high of 8.7% in 2022. Slowing global demand is clouding its outlook for energy, commodities and high-tech goods exports.

In a statement, BNM said the latest developments point to further expansion in economic activity in the first quarter of 2023, driven by strong domestic demand, household spending and better labour market conditions.

It said that while inflation was expected to moderate, core inflation would remain elevated amid firm demand conditions.

“With the domestic growth outlook remaining resilient, the MPC considers it timely to normalise the degree of monetary accommodation further,” the central bank said of its MPC.

Government data showed that consumer prices rose 3.4% in March from a year earlier, the slowest pace in nine months.

The central bank forecast headline inflation to average between 2.8% and 3.8% in 2023, compared with 3.3% last year. Bank Negara expects the Malaysian economy to grow by 4%-5% this year.