BAKU, Azerbaijan, Nov. 14
By Eldar Janashvili - Trend:
From January through September 2019, Azerbaijan’s Central Bank (CBA) held 40 deposit auctions to raise available funds in national currency and 40 auctions on the placement of notes, Trend reports referring to a published CBA report.
Through deposit operations, funds were raised for 14 days, and notes were placed for 28 and 84 days. At the same time, the issuance of longer-term notes (168 days, 252 days, etc.) began in order to increase sterilization of liquidity.
At the end of the reporting period, the total balance of funds raised through deposit operations and placement of notes amounted to 950 million manat ($558.8 million), of which funds raised by deposit operations amounted to 250 million manat ($147 million), and funds raised from the placement of notes - 700 million manat ($411.7 million).
Since the beginning of the year, the balance of funds raised through deposit auctions and placement of notes decreased by 44.4 percent, which affected the money supply.
From January through September 2019, interest rates on deposit operations and placement of notes as open market operations were formed at a level close to the minimum of the interest rate corridor. Despite low profitability of sterilization operations with a decrease in the interest rate corridor, demand at deposit auctions exceeded supply by 3.3 times, and at auctions for placement of notes by 2.8 times, which shows that liquidity in the banking system remains high.
Also, the CBA board six times discussed the parameters of the interest rate corridor, as a result of which decisions were made to gradually reduce the discount rate from 9.7 percent to 8 percent, the upper limit of the interest corridor - from 11.7 percent to 9.7 percent, and the lower - from 7.7 percent to 6.2 percent.
According to the results of the meeting of the CBA board, on Sept. 13 the range of the interest rate corridor was narrowed, and the upper and lower limits of the corridor were determined in the range of ±1.75 percent of the discount rate (previously ±2 percent).
Further decisions on the parameters of the interest rate corridor will be made depending on the state of inflation, changes in the balance of external and internal risks, in particular, on the transfer of fiscal incentives to prices, reads the report.
In order to ensure monetary demand and effective liquidity management in the reporting period, the CBA actively conducted various urgent market operations. Despite the relative growth in credit activity over the nine months of this year, Azerbaijan’s banking system continues to have a big surplus in liquidity, which leads to high demand for sterilization operations carried out by CBA.
($1= 1.7 manat on Nov. 14)