KUALA LUMPUR, Dec 12 — The Malaysian money market is expected to remain stable next week even though the US Federal Reserve (Fed) could execute a rate hike in its upcoming December 15-16 meeting.
The market had already priced in a US interest rate hike next week, said Bank Islam Malaysia Bhd Chief Economist Mohd Afzanizam Abdul Rashid.
“It is pretty much in the price. The odds for next week’s move is currently at 76 per cent as implied by the Fed Fund Futures, and this is higher compared to two months ago at 39 per cent.
“As such, rates should remain fairly stable,” he told Bernama.
The hike in US interest rate, if it materialises next week, would be the first Fed rate hike in over nine years, as it has been pegged at 0 per cent to 0.25 per cent since December 2008.
The local money market should continue to stablise unless the Fed signalled that it may hike aggressively after next week’s meeting, said Afzanizam.
“But this is quite unlikely as inflation rate is low. The US consumer price index grew at 0.2 per cent year-on-year in October as opposed to the target of 2.0 per cent,” he added.
Meanwhile, Bank Negara Malaysia (BNM) is expected to continue to manage excess liquidity in the local market.
The central bank is expected to continue the intervention with daily tenders to mop up excess funds from the market.
For the week just ended, BNM intervened daily to flush the system of surplus funds by conducting conventional, Commodity Murabahah Programme, Qard, range-maturity auction and repo tenders.
Yesterday, the central bank’s action helped reduce the market’s total liquidity surplus to RM33.46 billion in the conventional system and RM9.08 billion in Islamic funds.
The overnight Islamic reference rate stood at 3.21 per cent while the one-, two— and three-week rates stood at 3.30 per cent, 3.34 per cent and 3.39 per cent, respectively.
Meanwhile, the benchmark three-month interbank rate inched up to 3.81 per cent from 3.79 per cent previously. — Bernama
