Baku, Azerbaijan, Sept. 14
By Anvar Mammadov - Trend:
The CBA's policy on a certain easing of monetary policy and reduction of the interest rate, which has been implemented since the beginning of this year, should continue, and moreover should be continued more consistently and more radically to a certain extent, expert-economist, Doctor of Economic Sciences Elshad Mammadov told Trend Sept. 14.
The expert noted that today it is already possible to state a certain increase in business activity in the country. In such circumstances, he said, the easing of monetary policy, increasing monetization of the economy, increasing investment flows are the actions which are necessary for the country's economy.
"I believe that the level of monetization of the economy should be increased. Some caution of the Central Bank in this matter can be explained by fears of an increase in inflation rates due to the growth of the money supply," the expert said.
"But if the money supply is properly managed, and the funds reach the real sector of the economy, this will lead to the simultaneous solution of two problems - an increase in the rate of economic growth and targeted inflation," the expert added.
"Therefore, I believe that an increase in the money supply with its competent management will not lead to an increase in inflation. Therefore, the CBA should continue the policy of easing monetary policy," Mammadov said.
The expert also noted that when making decisions, the CBA should not be strongly guided by the tightening of monetary policy pursued in recent years by the Federal Reserve System (FED) of the US.
"Since the beginning of the year, the FED has been cautiously tightening monetary policy, but since 2008 the world's leading regulators have significantly reduced interest rates," the economist said.
"This helped them to cope with the financial crisis that began in 2007. These steps once again show that in order to combat economic difficulties it is necessary to increase the money supply," the economist explained.
"In the United States, the problem is that although the money supply has increased 4.5 times since 2008, only 20 percent of this volume has streamed into the economy. This is due to the structural problems of the US economy," the expert believes.
"Therefore, the FED is trying now to fight the financial bubbles that result from this, through tightening the monetary policy. Therefore, I believe that the CBA should not tighten monetary policy in response to a similar action on the part of the United States," Mammadov said.
"On the contrary, we need to gradually reduce the difference between the interest rates of key global players and the interest rate in the country. This difference creates the so-called "scissors effect", which is beneficial only to the US, which uses it for speculation in the markets of developing countries," Mammadov added.
The last changes in the discount rate were made at the meeting of the Central Bank Board on June 14. Then the regulator refrained from sharp changes, reducing the discount rate by one percentage point to 10 percent, and the cap of the interest rate collar - from 14 to 12 percent. The floor of the interest rate collar remained at the level of 8 percent.
In total, during the year the CBA reduced the discount rate three times: in February-from 15 to 13 percent, in April-from 13 to 11 percent, in June-from 11 to 10 percent.
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