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CBA BOARD PRESENTS PECULIARITIES OF ITS NEW MONETARY AND CREDIT POLICY TO HEADS OF COMMERCIAL BANKS
Noyan Tapan
Mar 16 2006
YEREVAN, MARCH 16, NOYAN TAPAN. A meeting of the Central Bank of
Armenia (CBA) Board members and the heads of the commercial banks
took place on March 14. NT was informed from the CBA press service
that the new instruments of the CBA monetary and credit policy
and the principles of their use were presented at the meeting. It
was noted that in order to ensure price stability in Armenia, the
CBA shifted to inflation targeting in January 2006 and currently
attaches importance to increasing the efficiency of the interest rate
transfer mechanism in the monetary and credit policy. The success
here will depend on a number of tasks such as the fight against
the shadow economy, the development of the financial system, the
integration of the international financial systems and increasing
the financial market liquidity. It was pointed out at the meeting
that the low level of liquidity of the Armenian financial market
prevents efficient management of financial institutions' liquidity,
and therefore the crediting of the economy. The meeting participants
pointed out that the instruments of the monetary and credit policy
should be aimed, through increasing the financial market liquidity,
at enhancing the efficiency of the interest rate instrument of the
transfer mechanism and strengthening the role of the short-term
interest rate for the financial market participants. The change in
the monetary and credit policy's strategy requires that the logic of
the CBA operations on the domestic financial market be reviewed. It
was underlined that for this purpose every Wednesday, as the main
instrument, the CBA will implement 14-day repo operations at the
interest rate of refinancing. The CBA will set the refinancing
interest rate, taking into account the deviations of the forecast
and target inflation indices, as well as the tendecies shown by the
interest rates on the market and the profitablity curve. Long-term
restricting structural instruments will be used, particularly the
issue of bonds and the sale of foreign currency for the monetary base
and liquidity management. The interest rate of lombard credit will
be smoothly reduced and will not be viewed as an instrument for fining.
Noyan Tapan
Mar 16 2006
YEREVAN, MARCH 16, NOYAN TAPAN. A meeting of the Central Bank of
Armenia (CBA) Board members and the heads of the commercial banks
took place on March 14. NT was informed from the CBA press service
that the new instruments of the CBA monetary and credit policy
and the principles of their use were presented at the meeting. It
was noted that in order to ensure price stability in Armenia, the
CBA shifted to inflation targeting in January 2006 and currently
attaches importance to increasing the efficiency of the interest rate
transfer mechanism in the monetary and credit policy. The success
here will depend on a number of tasks such as the fight against
the shadow economy, the development of the financial system, the
integration of the international financial systems and increasing
the financial market liquidity. It was pointed out at the meeting
that the low level of liquidity of the Armenian financial market
prevents efficient management of financial institutions' liquidity,
and therefore the crediting of the economy. The meeting participants
pointed out that the instruments of the monetary and credit policy
should be aimed, through increasing the financial market liquidity,
at enhancing the efficiency of the interest rate instrument of the
transfer mechanism and strengthening the role of the short-term
interest rate for the financial market participants. The change in
the monetary and credit policy's strategy requires that the logic of
the CBA operations on the domestic financial market be reviewed. It
was underlined that for this purpose every Wednesday, as the main
instrument, the CBA will implement 14-day repo operations at the
interest rate of refinancing. The CBA will set the refinancing
interest rate, taking into account the deviations of the forecast
and target inflation indices, as well as the tendecies shown by the
interest rates on the market and the profitablity curve. Long-term
restricting structural instruments will be used, particularly the
issue of bonds and the sale of foreign currency for the monetary base
and liquidity management. The interest rate of lombard credit will
be smoothly reduced and will not be viewed as an instrument for fining.