BoT to maintain inflation close to 5pc target

According to the bank’s monetary statement for the period ended June, this year, the bank will continue to deploy a mix of monetary policy instruments, while ensuring that money market operates efficiently towards sustaining stability of short-term interest rates.

The financial market will continue to be strengthened in line with the objective of widening participation and deepening financial markets instruments to facilitate better and efficient price discovery.

The bank will also implement reserve averaging framework that will provide flexibility to banks in managing liquidity more efficiently and thus help to reduce volatility of short-term interest rates.

The bank will continue to improve the monetary policy framework by solidifying its role in stabilisation of banks’ free reserves. Further, the BoT will enhance information sharing with banks to improve the functioning of the money market.

Also BoT will continue to monitor monetary aggregates cautiously and review them when need arises. Interest rates will continue to be determined by market forces with Treasury bills market being an anchor.

The bank will continue to work closely with market players to improve transparency of monetary policy operations and instil greater efficiency in the determination of market based interest rates.

This will further improve the function of the money market and reduce volatility in the interbank cash market, while increasing the role of interest rates in the transmission of impact of monetary policy actions.

The exchange rate will continue to be market determined, with the bank participating in the foreign exchange market for liquidity management purposes and intervening occasionally to smooth out excessive short term volatility in the exchange rate.

This will be done while ensuring that foreign exchange reserves are maintained at not less than four months of import cover.

SOURCE: DAILY NEWS

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