KUALA LUMPUR: Investors and and money-market players are cautious ahead of the BNM's Monetary Policy Committee (MPC) meeting next week which may decide to raise the Overnight Policy Rate (OPR), which currently stood at three per cent.

Market rumours are rife that the central bank may raise the OPR by 25 basis points (bps) to 3.25 per cent after the hawkish shift in the last meeting.

The short-tenured interbank rates, however, are expected to remain stable next week with BNM continuing to intervene by mopping up excess liquidity from the market.

"Opinion are mix in the market. Market talks indicate that there is a chance that BNM's MPC will decide a rise in OPR by 25 bps next week, after the hawkish shift in the last meeting.

"In addition, some quarters opined that fundamentally, the hike is not necessary," a local money dealer told Bernama.

The last time the central bank adjusted the OPR was in July 2016, when it reduced the rate (from 3.25 per cent) by 25 bps to three per cent, citing rising risks from Britain's exit from the European Union.

BNM maintained the OPR rate of three per cent since then, following its stance that monetary policy is accommodative and supportive of the economic activities.

She said with OPR hike or not, the central bank is expected to intervene with daily tenders and via conventional and Islamic instruments to stabilise the local money market if needed.

Usual tools to absorb excess funds from the system include money market tenders, repo tenders, range-maturity auctions of both conventional and Islamic, and commodity murabahah programme money market tenders.

For the week just ended, BNM intervened daily to flush the system of surplus funds.

The total liquidity surplus for the week just-ended advanced to RM28.62 billion in conventional operations against RM27.04 billion last Friday, while Islamic funds rose to RM9.17 billion versus RM8.72 billion previously.

On a week-to-week basis, the benchmark three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) inched up to 3.44 per cent from 3.43 previously.

Meanwhile, the overnight Islamic reference rate stood at 2.97 per cent, while the one-, two- and three-week rates stood at 3.03 per cent, 3.07 per cent and 3.12 per cent, respectively, throughout the week. -- BERNAMA