On Thursday, it said that the "normalisation" of monetary policy was needed to ward off risks of financial and economic imbalances that undermine growth. It said that its new stance remained supportive of the economy, which it saw showing continued strength in exports and private sector activity.
"Going forward, the overall growth momentum is expected to be sustained," it said in its statement accompanying the decision.
The economy grew at a robust pace of 6.2 percent in the first quarter from a year earlier. The majority of economists polled by Reuters had anticipated a 25-basis-point hike as economic conditions at home and abroad improve and inflation stays high.
Many analysts expect interest rates to rise one more time before the end of the year due to inflationary pressure and robust growth. Industrial output grew at its fastest pace in three months in May, data released earlier on Thursday showed.
"We expect another hike in September because the momentum is still there," said Wellian Wiranto, an economist at OCBC Bank in Singapore. "Even after the hike, there's a risk that inflation will pick up."
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Economists had expected the rate hike following strong growth and the continued increase in housing loan approvals. Property loans form more than half of the country's household debt, which is now at a lofty 86.8 percent of GDP.
Malaysia's household debt has risen more than 25 percentage points in just 6 years, as domestic consumption grew on loose credit.
"Many are treating the property market as the new deposit box that pays higher returns than what banks are offering," DBS said in a recent research note.
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Inflation rose to 3.2 percent in May in contrast to 1.8 percent in June 2013, before the government imposed higher electricity tariffs, reducing fuel subsidies and eliminating the sugar subsidy.