Central Bank Raised Discount Rate from 5 to 7%

By the decision of the Board of the Central Bank on March 4, from the same date the discount refinancing rate of banks increased from 5% to 7%. The decision is justified "in order to ensure macroeconomic stability and the new trends in the monetary and financial markets."

In addition, the upper limit of the interest rate corridor on the liquidity operations was brought to 17%. The lower limit of the corridor is left at the same level - 2%. Banks are able to conduct operations in this corridor for 7 days instead of 1 day.

The CBA notes that consistent steps are taken to ensure sustainable macroeconomic stability, including promoting the use of the national currency as an investment tool. "Placement of government securities by the high level of profitability, the establishment of higher interest rates on the protected deposits in the national currency is aimed at strengthening confidence in the manat", the report of the Central Bank highlighted.

The expert of the Public Association Assistance to Economic Initiatives Samir Aliyev, commenting on the CBA decision to revise the interest rates, said he did not rule out their further increase. "The main purpose of raising interest rates is to keep inflation under control and increase profitability on manat assets," emphasized the economist.      

According to Samir Aliyev, the CBA may be preparing to increase the weight of the manat in circulation and, therefore, adopted a preventive measure in this regard.

The central bank also took decisions on differentiation of mandatory reserve requirements for commercial banks. --08B--