Overnight Policy Rate

Overnight Policy Rate (OPR) is an overnight interest rate set by Bank Negara Malaysia. This
overnight policy rate or interest rate is a rate a borrower bank has to pay to a leading bank for
the funds borrowed.
Banks that experience shortages will borrow short-term funds overnight from the banks that
experience surplus or from BNM. This inter-bank funding will be charged with the overnight
interest set by the BNM, as to ensure that the banking system remains stable. The increase or
decrease in OPR will affect the cost of borrowings for banks, which will eventually lead to a
chain effect. The effect including short-term interest rates, fixed deposit rate, foreign
exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a
range of economic variables, including employment, output, and prices of goods and services
which is the micro and macro factors on the economic.

The effect of remain OPR

Source from website BNM:

http://www.bnm.gov.my/index.php?csrf=&ch=mone&pg=mone_opr_stmt&lang=en&yearfr=
2017
Overall, the Monetary Policy Committee (MPC) of Bank Negara Malaysia has maintained
the Overnight Policy Rate (OPR) at 3.00 percent in the year of 2017.
The decision to hold the Overnight Policy Rate unchanged reflects the Bank’s growing
optimism regarding the current state of the Malaysian economy after a year of subdued
growth prompted by low oil prices and weak global trade activity. At the OPR’s current level,
the stance of monetary policy was accommodative and supportive of economic activity.
EFFECT
- Maintain the Malaysia's growth momentum particularly after the strong first half-of
2017 growth of 5.7%. Average growth of 6.5% for the first two months of 3Q17
industrial production index (IPI) (July and August) has surpassed first half-of 2017 's
average of 4.3%, suggesting that growth momentum in 3Q17 will continue to be
good. Therefore, the risk of decelerating economic momentum can be discounted,"
said Public Invest Research.
- On the ringgit, BNM said it has remained stable with a more balanced demand and
supply of foreign currencies following the implementation of the two financial market
development measures. Banking system liquidity remains sufficient with financial
institutions continuing to operate with strong capital and liquidity buffers. The growth
of financing to the private sector has improved, consistent with the pace of economic
activity.

- can maintain the loan interest rate. This will maintain the cost of borrowing for the
personal and household rate. At the same time, it also means that fixed deposit
interest, saving interest will also remain at the same rate.

**https://www.propertyguru.com.my/property-news/2016/7/130561/6-impacts-of-overnight-
policy-rate-reduction

**As core inflation remains stable at the moment, it does not foresee the possibility of a
tightening in monetary policy this year
http://www.thesundaily.my/news/2017/11/05/opr-likely-remain-unchanged-till-end-2018
https://www.nst.com.my/business/2017/05/239404/opr-stay-3-2017-research-houses
http://www.theedgemarkets.com/article/bnm-maintains-opr-3-1
https://www.focus-economics.com/countries/malaysia/news/monetary-policy/bnm-maintains-
its-policy-rate-unchanged-in-may
http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=4540&lang=en
http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=4463&lang=en
https://www.thestar.com.my/business/business-news/2017/07/05/will-bank-negara-hike-
interest-rates/
http://www.theedgemarkets.com/article/opr-hike-possible-2018-economy-strengthens
https://www.thestar.com.my/business/business-news/2017/09/08/bank-negara-keeps-
overnight-policy-rate-at-3/
http://www.blr.my/Financial%20Glossary/Overnight%20Policy%20Rate.htm
http://www.exchangerate.my/pages/Understand-what-is-OPR-and-how-it-affects-us
http://www.thesundaily.my/news/2017/09/21/fed-decision-unlikely-affect-opr-ringgit
https://www.propertyguru.com.my/property-news/2016/7/130561/6-impacts-of-overnight-
policy-rate-reduction
https://www.imoney.my/articles/opr-hike-by-25bps-how-will-it-affect-you

Sources: Department of Statistics, Malaysia

https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=100&bul_id=M3ZGd
XNNYTA4SExGWEhvb2F4T3ZEQT09&menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWR
RQT09