Economists think the central bank will keep the Overnight Policy Rate (OPR) at 2.75 per cent when its monetary policy committee meets today.
Low borrowing costs have kept the economy buzzing with corporate deals, which in turn fuelled the stock market's rise to fresh records.
Consumer spending was also strong in big-ticket items. Malaysia is set to post record car sales in 2010, while lending curbs were introduced to rein in speculative buying of properties.
But economists polled by the Business Times expect BNM to start raising the OPR at the next meeting on March 11. Central banks typically raise interest rates to curb inflation.
He expects the Consumer Price Index (CPI), the measure of inflation, to breach 3 per cent by year-end.
"With oil prices likely to head north and expectations for oil at US$100 (RM305) per barrel by the end of the year, there will be greater urgency to cut the RON95 subsidy further to maintain the subsidy bill at current levels.
"With RON97 no longer subsidised and subject to an automatic pricing mechanism since July 2010, there could be a somewhat swifter and more direct pass-through from crude prices to petrol prices," he commented.
But Malaysia's 2.2 per cent CPI level would be the envy of regional nations like China, India, Vietnam and Indonesia, said DBS Bank economist Irvin Seah.
"Credit should be given to the policymakers in BNM for taking decisive and pre-emptive tightening move in early 2010 despite the risks associated with the European debt crisis then," Seah said.
When central banks across the region put on hold their plans to raise interest rates, BNM went ahead with 75 basis points rate hikes to nip inflation in the bud and to prevent financial imbalances.
That best explains the current modest inflation that the economy is enjoying, said Seah.
"The appreciation in ringgit has also an important role in keeping imported inflation at bay."
The local currency was one of the best performing emerging Asia currencies last year. It appreciated by 10.6 per cent against the greenback in 2010.
Alvin Liew of Standard Chartered Bank expects BNM to prepare the markets for another round of OPR hikes given the central bank's proactive approach to monetary policy formulation.
