How does the OPR *

influence economic
growth?

* Overnight Policy Rate

BNM Explains
Monetary Policy
 BNM Explains
Monetary Policy

When the economy was weak

(e.g. COVID-19), the OPR was reduced to
encourage spending and investment

With a lower OPR, you will have:

Cheaper loans Lower deposit rates

However, keeping the OPR too low for too long may cause
over-spending and over-borrowing, which pushes prices
up higher. This hurts lower-income households the most.
 BNM Explains
Monetary Policy

As the economy recovers,

we are adjusting the OPR in a
measured and gradual manner
Other central banks are increasing
their rates too! But with larger
increases, and at a faster pace.

225
bps

125 125
bps bps
50
bps
1 2
US Fed BOK BSP 3 BNM 4

Change in interest rates in 2022

1 2 3 4
US Federal Reserve Bank of Korea Bangko Sentral ng Pilipinas Bank Negara Malaysia
 BNM Explains
Monetary Policy

The higher OPR helps manage

the risk of price increases
caused by over-borrowing and
too much spending

Higher OPR discourages spending by

making borrowing more expensive
(but for floating-rate loans only!).

It also encourages saving with

higher deposit rates.
 BNM Explains
Monetary Policy

While changes to the OPR are more

quickly reflected in the financial
markets, the impact on the broader
economy will take some time
This is like slowing a lorry that is driving too fast by
gently hitting the brakes early. It will take some time
before it slows to a safer speed.

Stay tuned for more from our BNM Explains series