THE Bank of Tanzania (BoT) will continue pursuing prudent monetary policy in 2016/17 to keep inflation close to the medium-term target of 5 per cent, while ensuring that liquidity level is consistent with demands of various economic activities.
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.
No comments:
Post a Comment