NBA Specifies Money Policy’s Normative Goals to Manage Inflation
Azerbaijan, Baku, 11 June / Trend corr I. Khalilova/ "In order to provide stability in the consumer prices in the domestic market, the National Bank of Azerbaijan (NBA) has specified normative goals of money policy that consist of intermediate and operational goals," NBA reported on 10 June. So far, inflation forecasts have been made through comparative analysis of fiscal and foreign sectors, as well as real sectors of economy.
Inflation is affected by the payment balance condition, growth rate of state expenditures and their financing sources, which is managed by NBA through money bulk and currency rate. Depending on these factors, intermediate and operational goals were determined.
Intermediary goals of money policy fall into two groups: cost indices - exchange rates and percent rates in short-term money market; quality indices - money bulk. Central banks usually use cost indices, in particular change of percent rates, as a transmissible target for inflation management within development of multi-segment capital market. The exchange rates are used to influence the inflation in the highly dollarization economy, enough access to the outer world with small economy and in case of a sharp and constant change in the balance in other spheres (fiscal and foreign).
The Central Banks make use of quality indicators to target inflation, under the condition of exact forecasting of the macroeconomic frames between the desired level of inflation and stabile money proposals and money supply.
The operational indicators are determined adequately by the quantity parameters (especially, through changes in exchange rates or quality of currency basket, interest rates on operations of the National Bank and volumes of an open operation market).
In 2008, NBA has already re-considered the rate from 13% to 15% which has been in force since 9 June. The lowest and highest point of the 'percent corridor' have been corrected and now they make up 20% (19% previously) and 3% (5% previously) respectively. Moreover, MBA began new exchange rate conception from 11 March, which envisages support for the cost of the Azerbaijani manat against bi-currency basket in the composition of US dollar and euro. On 1 June, the basket was approved at 70% in dollars and 30% in euros.
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