Rates Raised

Sri Dharanee Performance Arts Theatre

The Monetary Board raised its short term interest rates by 25 basis points and opted to pursue open market operations more aggressively to curb spiralling inflation. The Monetary Board raised its short term interest rates by 25 basis points and opted to pursue open market operations more aggressively to curb spiralling inflation. The Central Bank following the monetary board’s Thursday evening monthly meeting said its overnight repurchase (repo) would move up to 7.75 percent and its reverse repurchase (reverse repo) rates notches up to 9.25 percent.

The repo-rate or the repurchase 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 Bank’s main instrument of signalling the expected direction of overall interest rates to the market.

The repo window acts as the lender at last resort for commercial banks for their trading activities, backed by their government security holdings.

The financial markets were however pinning hopes on a 100 basis point increase keeping with the upward m