Malaysia raises interest rates

The Overnight Policy Rate of OPR was increased by one quarter of one percent to 2.5% the Bank said in a statement.

It's the second such rise in the past two months from a low of 2% which Governor Zeti Akhtar says was to deal with "exceptional circumstances[which] no longer prevail.

Retail (mortgage) lending has been running at 2.4 - 3% above the Bank's rate.

Malaysia's Ringgit has appreciated against many currencies in recent weeks, in particular the pound sterling. UK banks are converting MYR card spending at MYR4.4 / pound: before the financial crisis the rate occasionally peaked at MYR7.7/pound.

Although many basics including foodstuffs and petrol are price controlled, there is widespread inflation with some shoppers reporting that their usual shopping bill has increased by as much as 30% in the past two years.

House prices in some areas have increased, particularly for new builds although there remains a very substantial number of unsold properties in housing estates in the suburbs of major cities, in some cases entire estates are vacant. Under the Malaysian system of buy-to-build, purchasers take out a mortgage "off the plans" and developers use that money to build properties. But they do not hypothecate a specific loan to a specific property: they develop the whole estate including unsold property to a set level, then collect all the stage payments. This often leads to cashflow problems and purchasers can find that developments take years to complete - and sometimes never do.

This overhang rarely affects the ultra-modern developments in, for example, central Kuala Lumpur where premium property has seen a boost as more developments are begun.