to the formation of the central bank interest rates on transactions as
reducing inflation and ensuring the sustainability of the national
In terms of the particular state interest rate policy has its own unique structure.
The main instruments of the central bank's interest rate policy are the
basic refinancing rate and bank rates on transactions in financial
The refinancing rate in the evolution of the monetary system has become
more indicative measure, giving the economy a reference value of
national currency in the medium term.
Although it certainly can not deny the fact that the refinancing rate
has a significant influence on the level of interest in the economy.
Interest rates on central bank operations in the financial market
(hereinafter - the rate for operations) - operational tool of interest
For him the bank conducts transactions in the financial market, carry
out refinancing and liquidity withdrawal from banks, thereby forming a
level of profitability in different market segments.
Central Bank to conduct interest rate policy adheres to the principles
and approaches focused on specific goals, has a management strategy.
Some of these approaches we will try to cover in this article, because
it is the management of interest rates on bank operations cause a
significant number of issues.
Conducting operations in the financial market and setting interest
rates for instruments of monetary policy, the bank not only forms a
corridor of fluctuations in interest rates in the economy, but also
creates market expectations, which will impact on economic development
in the short term through the effects on the motivation of banks to
manage their resource flows, including the decision to build the
resource base and the placement of credit and other resources.
After all, the bank not only the central body monetary, but also an
active participant in the financial market, whose work has a significant
effect of macroeconomic and interest rate policy is probably the most
important instrument of policy.
By adjusting the interest rates on the instruments, the central bank
seeks to address these very specific objectives of monetary policy:
- Formation of return (level corridor and vibration) on foreign
currency instruments to the sustainable excess returns on money market
instruments over the yield on foreign currency transactions as in the
medium term and short periods of time, including taking into account the
estimated foreign exchange risks;
Conducting monetary policy, central bank of any country uses some leverage, it has tools that allow it to achieve its targets. Interest rate policy is one of those tools inherent in virtually all of the monetary systems of the world.
By adjusting the value of money through the interest rate the central
bank can influence the most important macroeconomic variables: the level
of savings and investment in the economy, inflation, demand for
financial assets, capital flows, etc.
Maintaining the rate of interest at an optimum level can ensure the
stability of the monetary system of the country, promotes economic
development and the achievement of targets of monetary policy the
central bank of, for example, the formation of return on bank
operations, ensuring the involvement of public resources (primarily) and
business entities and minimizing the risk of outflow of customers;
- Formation of return on bank operations, ensuring the availability of bank credit for working effectively entities;
- To prevent the flow of substantial amounts of speculative capital and
the formation of market returns, which can not be assured of the
national economy and banking system on a sustainable basis;
- Encouraging banks to solve the problem as quickly as the current liquidity;
- The formation of market expectations that the practice of establishing rates persist over the medium term.
It should be noted that the central bank carries out transactions in
financial markets without commercial approach and is not intended to
receive income or limitation of damages (eg, operations for receiving
funds in deposits).
Bank's operations can be both profitable and unprofitable character,
depending on the direction of its ongoing operations in the market. The question of profitability of operations is not put to the fore by any central bank. The main thing - it's strategic goals of monetary policy.
It should be noted another important aspect of the current interest
rate policy: in most advanced economies, interest rates on instruments
of monetary policy the central bank are formed around the refinancing
The influence of central bank interest rates on financial markets is
manifested mainly in the process of bank operations to regulate the
current liquidity of the banking system.
Conducting operations in support of or withdrawal of liquidity, the
bank conducts transactions with banks to set interest rates and affects
the interest of the latter in carrying out an operation, which in turn
has an effect on the value of resources in the banking system and banks'
activities in carrying out operations with financial assets, sets
benchmarks fluctuations in interest rates in the banking system, and
hence the economy as a whole. Regulation of interest rates the bank pays close attention, and their structure is reviewed at least once a week.
The main regulatory body taking the decision to change interest rates
for some operations, Operations Committee is the central bank.
To analyze the nature of the effect of rates on transactions above all
need to re-draw the line between interest rates and withdrawal of
liquidity support, as they are multidirectional nature of exposure.
By adjusting the interest rates on its operations, the bank adheres to certain principles and approaches.
Some of them are reflected in the main directions of monetary policy
for the next year and the principles regulating the current liquidity of
the banking system. However, this list is more extensive. Among the key principles in setting interest rates are the following.
1. Formation of a corridor for fluctuations in market interest rates.
By adjusting the interest rates on operations, the bank aims to form a
certain level of interest rates on credit and deposit market in the
banking system, which, in his view, will ensure the attractiveness of
the currency against foreign currencies will help to build savings in
the economy and ensure that the process of expanded reproduction.
This goal is achieved, including through the establishment and the
lower and upper limits on interest rate instruments to support or
withdrawal of liquidity in the banking system, which largely forms the
corridor of fluctuations in interest rates in the banking system and
contributes to achieving that goal.
2. Positivity rates on instruments of liquidity support in real terms.
Protecting and ensuring the stability of the currency against foreign
currencies - the strategic objective of monetary policy at the present
stage, set the Banking Code.
Providing a positive rate of return on assets is a necessary condition
for the implementation of the national currency of the basic functions
of money: a store of value, medium of exchange and measure of value.
Thus, we can say that the main principles that guide the central bank
in setting interest rates for transactions is the desire not to supplant
the market and ensure the redistribution of liquid assets within the
financial market to competition through market-based instruments with a
minimum emission involving the bank.
Strict adherence to the principles announced in the monetary control
and interest rate policy approaches and policy forms of liquidity
support normal market expectations, the banking system to stimulate the
efficient reallocation of funds and creation of the resource base
without centralized resource bank, and also allows you to maintain
stable operation of the currency and stock market while building the
In conclusion, we note the factors that will determine the prospects in the regulation of central bank interest rates.
1. Preservation of a uniform percentage of each group of tools to support liquidity.
2. Reducing the spread of profitability.
As rates of inflation and the emergence of resistant preconditions of
macroeconomic stabilization, together with a general lowering of nominal
interest rates as the market and bank rates will fall and yields
spreads between money market instruments, including yield between the
refinancing and interest rates on instruments , the yield on foreign
currency assets, etc.