The Central Bank left its key short-term rates unchanged on Tuesday, signalling that it was business as usual on the interest rate front.
The overnight repurchase rate (repo rate) was kept at 7.0 percent and the reverse repurchase rate (reverse repo) at 8.50 percent, the bank said in a statement following its monthly Monetary Policy Meeting late Monday.rn
rnThe bond market was divided late Monday, whether the bank should lower its rates, considering the current political impasse.rn
rnThe bank has maintained it soft interest bias right throughout the crisis and has met market players to assure them that there would not be a change in its borrowing programme.rn
rnThe reverse repo-rate is the rate at which primary dealers in treasury bills and commercial banks can obtain overnight funds from the Central Bank by pledging their treasury bill/bond holdings as collateral. rn
rnThe repo-rate is the key benchmark, which sets the floor in the overnight call money market, as it enables lenders to invest excess funds in treasury bills and bonds held by the Central Bank (i.e. at near zero risk).
It is also the Central Banks main instrument of signalling the expected direction of overall interest rates to the marketrn