OPR vs the Fed rate: how wide is Malaysia's gap, and what to watch before 5 November

The US Federal Reserve raised rates on 16 September 2026 for the first time since 2023, and Bank Negara Malaysia did not move. That is why the distance between the two policy rates is wider today than at the start of the year, even though nothing changed on the Malaysian side.

How far is the OPR below the Fed rate?

The OPR is 125 basis points below the top of the Fed’s target range. Bank Negara has kept the Overnight Policy Rate at 2.75% (BNM, 3 September 2026), and the Fed moved its range up to 3.75-4.00% (Federal Reserve, 16 September 2026).

OPR 2.75% minus the upper bound of the US federal funds target range, 4.00%, as of 17 October 2026 (CapsWindow calculation)

This note always compares against the upper bound of the Fed’s range. Using the midpoint (3.875%) or the lower bound (3.75%) would give −112.5 bp or −100 bp. The choice changes the level, not the direction of the story.

How has the gap moved since 2019?

The gap was positive before the pandemic, turned deeply negative when the Fed raised rates quickly in 2022-2023, and narrowed as the Fed cut in 2024-2025. Malaysian values are month-end figures from the BIS policy-rate series, which draws on Bank Negara; US values come from the FRED upper-bound series.

Visual guide

How has the gap moved since 2019?

Gap (calculated)

• End-2019+125 bp
• End-2022−175 bp
• 26 July 2023 (Fed peak decision)−250 bp
• End-2024−150 bp
• End-2025−100 bp
• 17 October 2026−125 bp

-250125

Point in time	OPR	Fed upper bound	Gap (calculated)
End-2019	3.00%	1.75%	+125 bp
End-2022	2.75%	4.50%	−175 bp
26 July 2023 (Fed peak decision)	3.00%	5.50%	−250 bp
End-2023	3.00%	5.50%	−250 bp
End-2024	3.00%	4.50%	−150 bp
End-2025	2.75%	3.75%	−100 bp
17 October 2026	2.75%	4.00%	−125 bp

Between the Fed’s peak in July 2023 and today the gap narrowed by 125 bp. Bank Negara lowered the OPR by 25 bp over that period and the Fed’s upper bound fell by 150 bp, so most of the change came from Washington, not Kuala Lumpur. The move from −100 bp at end-2025 to −125 bp now is entirely the Fed’s September increase.

What did Bank Negara decide in 2026?

It held the OPR at 2.75% at every meeting. The last change was a 25 bp cut, from 3.00% to 2.75%, on 9 July 2025.

Meeting	Decision	OPR
22 January 2026	Hold	2.75%
5 March 2026	Hold	2.75%
7 May 2026	Hold	2.75%
9 July 2026	Hold	2.75%
3 September 2026	Hold	2.75%

In its September statement BNM noted first-half growth of 5.7% and average headline inflation of 1.8% for January-July. For households, the OPR matters most through floating-rate loans: since August 2022 new retail floating-rate loans in Malaysia have been priced off the Standardised Base Rate, which is tied only to the OPR (Public Bank consumer guide). A wider gap with the Fed does not by itself change that rate.

What is the real policy rate, and how does it compare?

Subtracting the latest annual inflation rate gives a simple real policy rate. For Malaysia that is 2.75% minus August 2026 inflation of 1.9% (OpenDOSM), or +0.85 percentage points. For the US it is 4.00% minus September inflation of 3.7% (BLS), or +0.30 points.

Economy	Policy rate	Gap vs Fed upper bound	Latest CPI (month)	Simple real rate (calculated)
Malaysia	2.75%	−125 bp	1.9% (August)	+0.85 pt
United States	3.75-4.00%	—	3.7% (September)	+0.30 pt (upper bound)
Indonesia	5.75%	+175 bp	3.28% (September)	+2.47 pt
Philippines	5.00%	+100 bp	7.2% (September)	−2.20 pt
Thailand	1.00%	−300 bp	2.82% (September)	−1.82 pt

So the nominal gap with the Fed is negative, but after inflation Malaysia’s policy rate is slightly higher than America’s. Low Malaysian inflation is the main reason. Singapore is left out because the Monetary Authority of Singapore steers the exchange rate rather than an interest rate. Inflation months differ between rows, so treat the last column as a rough comparison.

What happens in late October, and what is the market watching?

Bank Negara meets after the Fed, so it will know the US decision before setting the OPR. The regional calendar in local dates (FOMC calendar, BNM schedule):

• 21 October: Bank Indonesia announces its decision.
• 22 October: Bangko Sentral ng Pilipinas and the Bank of Korea.
• 27-28 October: Federal Reserve (result late on 28 October, US time).
• 28 October: Bank of Thailand.
• 29-30 October: Bank of Japan.
• 5 November: Bank Negara Malaysia.

Futures pricing on another Fed increase in October swung during the week. CME FedWatch put the chance at 41.5% on 14 October (Yahoo Finance) and at around 15-17% on 16 October (Investing.com, Cointelegraph), after Fed Chair Kevin Warsh said “I don’t prejudge meetings”. These are market-implied probabilities on given days, not predictions of the result.

For Bank Negara, Apex Securities expects the OPR to stay at 2.75% at the November meeting (New Straits Times). That is one firm’s forecast.

The arithmetic of the two Fed outcomes, assuming the OPR stays where it is, is simple: if the Fed holds, the gap stays at −125 bp; if it raises by 25 bp, the gap becomes −150 bp. Neither number says what Bank Negara will do.

If you want to see how a different interest-rate or inflation assumption changes a savings target, the calculator lets you set your own.

Test your own rate and inflation assumptions →

Does a negative gap weaken the ringgit?

Not on its own. The policy-rate gap has been negative at every checkpoint in the table since end-2022, yet the ringgit’s monthly average strengthened from 4.7723 per US dollar in February 2024 to 4.0687 in August 2026, a gain of about 17% (CapsWindow calculation from BNM rates via OpenDOSM). Trade flows, risk appetite and the US dollar’s own moves also matter. The longer-maturity version of this question, using 10-year bond yields, is covered in MGS vs US Treasury yields.