Open market operations to improve Iran's financial market

Finance Materials 18 January 2020 14:44 (UTC +04:00)
Open market operations to improve Iran's financial market

TEHRAN, Iran, Jan.18


Implementation of open market operations can improve Iran's financial market and bring more stability, said Director General of Saderat Bank.

"The important factor in open market operations is the bank's interest rate, as the most important tool of the operation is the government financial bonds," said Hojatollah Seyedi, Trend reports citing ILNA.

"It's natural that part of liquidity will be transferred to bonds; therefore, it would be useful in controlling liquidity," the director general added.

An open market operation is an activity by a central bank to give liquidity in its currency to a bank or a group of banks.

"The effects will be of short- and long-term. In short-term, there will be a fair interest rate, while the market will reach balance in the long-term," Seyedi added.

"Furthermore, since the open market operations is very strong tool for the Central Bank, there could be more open policy making in money market management and the liquidity will be stronger," he said.

Iran is expected to issue security bonds of about $19 billion according to the budget for next Iranian year (begins March 21, 2020), while some experts say there is no $476-million liquidity that can work in open market operation.

"At this stage, it is not possible to say if the figure is sufficient, although, if the circulation volume is high, it will have considerable effect on the market," Seyedi said.