BNM raised the OPR by 25 bps to 2.25% on Wednesday, which came following May’s hike from a record low of 1.75% to 2%.

“Following the back-to-back rate hikes amounting to 50 bps cumulatively, we have raised our forecast for Malaysia’s policy rate to reach 2.75% by end-2022, which would entail an additional 50 bps worth of hikes over H2 2022,” said the research arm of US credit rating agency Fitch Solutions.

The OPR was reduced by a cumulative 125 bps to a historic low of 1.75% over the course of the Covid-19 crisis in a bid by BNM to support the economy.

Fitch Solutions said although inflation has remained “relatively benign” due to government intervention, it noted that the ringgit has been under persistent downward pressure.

This will add to pressures for the central bank to normalise its accommodative monetary stance, it said.

It said the economy remains on track to post a strong recovery, which should provide BNM with sufficient room to normalise its monetary policy.

Fitch Solutions said Malaysia’s inflation has been kept in check this year thanks to the blanket fuel subsidy and price controls on items included in the inflation basket, averaging at just 2.4% in the first five months of the year.

However, it noted that inflation in Malaysia has been on an uptrend since March, adding that it expects it to continue accelerating over the coming months because of the elevated commodity prices and a pickup in domestic demand.

It predicted inflation to average 2.8% for the whole of 2022, which is within BNM’s 2.2% to 3.2% forecast range for the year.