But there's a yellow light for inflation, since they show unused capacity has come down. That, combined with high prices for fuels will force the central bank to act with a lot of caution.

The maintaining of the rate reflects that there is not a dangerous core inflation pressure, while the advance in total inflation is due to international price increases in fuel and not due to strong (domestic) demand.

It is a realization that there are inflation headwinds out there.

Inflation is still higher than nominal interest rates, and this is a clear sign that monetary conditions are highly accommodative in Malaysia and the need for interest rates to return to a neutral level.

This is the start of a hiking cycle. A series of small hikes will follow until inflation falls below 3%.

House price inflation has picked up in recent months; if this continues it has positive implications for consumer spending via the wealth effect it provides to homeowners.