At the Monetary Policy Committee (MPC) meeting of Bank Negara Malaysia on 24 February

2009, the committee decided to reduce the Overnight Policy Rate (OPR) by 50 basis points to

2.00 percent from 3.25%. The MPC statement states the recent quarter saw a dramatic decline

in the global financial and economic landscape. While the regional economies are slowing down

quickly, the main advanced economies are seeing a deeper economic recession. The swift

reduction in worldwide demand has resulted in a heightened influence on trade, production,

and investment activity within the Asian region. The instability on the global financial markets

has also persisted for a long time. Even though several economies have implemented stimulus

plans to combat the slump, the economy has not yet seen the effects of these plans. The

prospects for the world economy are now far more vulnerable to negative developments. At this

point, the inflation rate in Malaysia was recorded at -0.09 which is a deflation. To boost up the

economic expansion and consumers spending, the central bank needs to reduce the interest

rate and relatively boost the supply of cash among the players of economy. In this situation, the

MPC’s decision to reduce the OPR from 3.25% to 2.00% is a brilliant step. Following this event,

the Consumer Price Index (CPI) in March 2009 was declined from 111.9 to 111.7. This downfall

in the CPI have improved the consumer’s purchasing power. In a deflationary environment, the

value of money increases, meaning that consumers can buy more goods and services with the

same amount of money. This can boost the spending among those with fixed incomes or

savings. Moreover, deflation can lead to a realignment of relative prices, making certain goods

and services more affordable. This can contribute to a more efficient allocation of resources in

the economy. While most of the world’s economy facing a recession and expecting an economic

expansion, this initiative by the MPC have benefited Malaysian economy to bounce back from a

recession. In the following MPC meeting of the central bank on 29 April 2009, the committee

have decided to maintain the OPR at 2.00%. The MPC statement have mentioned that the first
quarter of 2009 saw a further decline in the state of the world economy, and the worldwide

financial system's circumstances have not yet returned to normal. Major industrialized

economies are currently going through a deepening economic contraction, despite some

indications in recent months that the speed of decline in certain economic indices may be

slowing. Additionally, regional economies saw a notable downturn in activity during the first

quarter of the year. The probability of improving economic conditions in the second half of the

year has grown despite the near-term prognosis remaining poor due to the massive stimulus

measures implemented by various countries. Following the MPC meeting in April, the data

shows that the Consumer Price Index (CPI) in May has increased to 111.7 from 111.5. This

shows us the consumers’ spending and the purchasing power have increased. At the same time,

the economy has also recovered from deflation and the rate of inflation has increased to 0.18%.

By these phenomena, we could conclude that the MPC’s decision to maintain the OPR at 2.00%

was a fruitful initiative.

At the Monetary Policy Committee (MPC) meeting of Bank Negara Malaysia on 7 March 2018,

the committee decided to maintain the Overnight Policy Rate (OPR) at 3.25 percent. As per the

Monetary Policy Statement states that the world economy is still getting stronger, international

trade is expanding rapidly, growing salaries and governmental support will provide advanced

economies further growth momentum. Growth in Asia will be fueled by both robust external

demand and ongoing domestic activity. The main purpose of the central bank imposing

Overnight Policy Rate (OPR) is to maintain a stable supply of cash according to the economic

factors such as inflation and economic expansion. The common fact is OPR will influence the

inflation rate and it will relatively impact elements like economic expansion, exchange rate and

the governments balance of payments. The MPC statement on March 2018 states that the OPR

will remain at 3.25%. The decision to keep the OPR unchanged at 3.25% is an appreciable

decision because the inflation rate in February 2018 is recorded at 0%. When there is 0% of

inflation recorded, the best a central bank could do is keep the OPR untouched and maintaining

it. Even though the inflation rate in March slightly increased to 0.33%, the inflation rate went

down to 0% again in April 2018. So, the decision by the MPC to maintain OPR was strongly

seems to be a wise decision. In the next MPC meeting, which was held on 10 May 2018, the

MPC has stated that the OPR will be maintained at 3.25%. The rate which perfectly holds the

inflation at 0% from going negative and avoids deflation seems to be a balanced interest rate

by the central bank. Even though the OPR remains untouched for two times continuously that

was a wise and efficient decision. The efficiency of these decisions by MPC was proved by a

narrow range of the movement of Consumer Price Index (CPI) between 120.9 to 121.1 between

the period.