Monetary Twist

Central Bank staff was briefed last week on the latest changes that would affect monetary policy.rn

rnSenior Central bankers were educating staff on the changes that will take place in the short-term money market with the introduction of Open market operations.rn

rnOpen market operations will allow the Central Bank more control over the overnight market.rn

rnThey do this by influencing the short-term rates at which banks borrow or lend depending on whether they have a liquidity surplus or shortfall.rn

rnWhen the market cannot supply the banks needs, commercial banks go to the Central Bank for additional cash or to sell excess cash. rn

rnThis is done through the reverse repo window, which lends to banks that need cash and the repo window, which can be used to park excess cash.rn

rnThe repo rate currently stands at 9.75 while the reverse repo window lends at 11.75 percent.rn

rnCentral Bank does not put a limit on the number or value of transaction through the borrowing or lending windows.rn