48 SMART: Overnight Policy Rate (OPR)
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Thursday, 15 August 2013

Overnight Policy Rate (OPR)

When we are reading newspaper, sometimes we would come across Overnight Policy Rate (OPR) in the economy section. So what is OPR? OPR is actually an overnight interest rate set by Bank Negara Malaysia (BNM) used for monetary policy direction.





















OPR is the interest rate at which a financial institution lends immediately available funds (balances within the Central Bank) to another financial institution overnight. OPR is under the new interest rate framework introduced by BNM since 23rd April 2004. Under this New Monetary Operating Procedures, OPR is the indicator of the monetary policy stance of BNM, with roles below:

  1. As a signalling device to indicate the monetary policy stance;
  2. As a target rate for the day-to-day liquidity operations of the Central Bank.
OPR will be decided in Monetary Policy Committee (MPC) meeting. Changes in the OPR trigger a chain of events that affect the base lending rate (BLR), short-term interest rates, fixed deposit rate, foreign exchange rates, long-term interest rates, the amount of money and credit.

Date
Change in OPR (%)
New OPR Level (%)
30 Nov 2004
0.00
2.70
30 Nov 2005
+0.30
3.00
22 Feb 2006
+0.25
3.25
26 Apr 2006
+0.25
3.50
24 Nov 2008
-0.25
3.25
21 Jan 2009
-0.75
2.50
24 Feb 2009
-0.50
2.00
04 Mar 2010
+0.25
2.25
13 May 2010
+0.25
2.50
08 Jul 2010
+0.25
2.75
05 May 2011
+0.25
3.00

Ultimately, a range of economic variables would be affected, including employment, output, and prices of goods and services which is the micro and macro factors on the economic. From the table above, the last adjustment for OPR was in Year 2011 and BNM is expected to maintain the OPR for the rest of this year but a possible 25 to 50 basis point hike is anticipated for Year 2014.


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