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Malaysia raises interest rate in first hike in three years

Malaysia's central bank on Thursday raised a key interest rate to curb inflation in the first adjustment in more than three years, amid public protests over price hikes.

KUALA LUMPUR: Malaysia's central bank on Thursday raised a key interest rate to curb inflation in the first adjustment in more than three years, amid public protests over price hikes.

Bank Negara said it decided to raise the overnight policy rate by 25 basis points to 3.25 percent on the back of "continued strength in exports and private sector activity".

"Amid the firm growth prospects and with inflation remaining above its long-run average, the MPC (monetary policy committee) decided to adjust the degree of monetary accommodation," it said in a statement.

Bank Negara has kept the rate steady since May 2011.

Inflation stood at 3.4 percent for the first five months of the year after cuts in fuel, sugar and other subsidies, according to the latest government figures.

For all of last year it was 2.1 percent compared to 2012.

Malaysians have staged a series of protests against rising prices, accusing the government of economic mismanagement and corruption that has drained state coffers.

Most recently, thousands gathered for an opposition-led rally on May Day to rally against a new consumer tax that will be introduced next year.

Economists have welcomed the expected six percent tax as a way to help lower one of Asia's highest debt-to-GDP ratios, but the opposition says it will burden ordinary consumers.

Southeast Asia's third largest economy grew a better-than-expected 6.2 percent in the first quarter of the year, boosted by strong export figures.

Exports from January to May this year jumped 13.5 percent with shipments to key partner China surging 11.4 percent in the period year-on-year.

Analysts have said the rate hike can also tackle high consumer debt.

Last year, the central bank imposed measures on household lending, including limits to loan tenures, to reign in what economists said was "excessive" consumer borrowing and curb property speculation.

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