Explainer What Is Opr And How Bank Negara S Decision Affects You

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At 3pm today, Bank Negara Malaysia is set to announce the overnight policy rate (OPR). NSTP/EIZAIRI SHAMSUDINKUALA LUMPUR: At 3pm today, Bank Negara Malaysia is set to announce the overnight policy rate (OPR), with most analysts expecting it to hold steady at 3.0 per cent. 
This marks the year's second OPR meeting led by Bank Negara Governor Datuk Seri Abdul Rasheed Ghaffour.
Notably, the OPR has been maintained at 3.0 per cent for 10 consecutive meetings since May 2023,
The OPR is a critical tool in Malaysia's monetary policy, reviewed by the Monetary Policy Committee (MPC) at least six times a year. 
But what does the OPR mean for the average person? 
Simply put, the OPR is the rate at which banks lend to each other overnight. 
It is set by Bank Negara and influences the cost of loans from banks to businesses and consumers. 
On a day-to-day basis, banks adjust their cash reserves based on their transactions and customer activities.
A bank might need to borrow money overnight to maintain required reserves if many customers withdraw their cash simultaneously. 
Banks with extra cash often lend to those short on reserves, ensuring a fluid and stable banking environment.
When Bank Negara raises the OPR, it aims to pull back the amount of money flowing in the economy and keep inflation in check. 
As a result, banks will hike their Standardised Base Rate (SBR), which means the monthly payments on loans will increase.
Conversely, when Bank Negara cuts the OPR, it is trying to boost economic activity by making more money and loans available. 
Banks respond by lowering their SBR, which can reduce monthly loan payments or shorten the repayment period, making loans more attractive to consumers.
MIDF Amanah Investment Bank Bhd forecasts that the OPR will stay at 3.0 per cent throughout 2025, citing a lack of significant demand-driven inflation and a belief that the current rate supports Malaysia's economic growth.
"In January, Malaysia's headline inflation remained steady at 1.7 per cent year-on-year, which is within our expected range," the bank noted. 
"This stability follows a slight decrease in food inflation to 2.5 per cent year-on-year, down from 2.7 per cent in December 2024, marking a moderation from the 14-month peak seen the previous month." - NST

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