Iran to implement OMO policies in late September: Chief banker
The Central Bank of Iran (CBI) would start implementing its first round of open market operation (OMO) policies in late September, says its governor, amid efforts to have a better control on money supply in the country that could dampen high rates of inflation.
Abdolnasser Hemmati said on Saturday that OMO policies would be a first in the history of the CBI which previously relied on management of monetary aggregates to control the liquidity and interest rate.
“In the past, it was the monetary aggregates that mattered to the CBI and it continues to matter even now,” said Hemmati, adding, “However, the CBI seeks to control monetary aggregates through the open market operation.”
The remarks covered in the ISNA agency suggested that the CBI is serious to implement regulations approved in March by Iran’s Supreme Council on Money and Credit which allowed the central bank to start buying government-issued bonds to both settle government debts to the banks and to have a better control on the burgeoning liquidity in the market.
Hemmati did not elaborate on details of the policy and the amount of the first batch of cash that the CBI would inject into the banking system via the OMO mechanism.
However, he said the policy would be launched with great caution and considering the “expert opinion of specialists in the money market”.
Hemmati had said in June that the CBI would finance part of governments’ debts to the banking system through the purchase of its bonds, insisting the move would seriously boost the cash supply in the banks.
Implementing OMO policies is also expected to have a positive impact on the unofficial interest rate in Iran as banks continue to drain money from the market through offering short-term rates higher than those approved by the CBI.
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