Open market to stabilize liquidity: banking expert

January 19, 2020 - 14:56

TEHRAN- Liquidity stabilization in the country will be the major result of launching open market operation (OMO) system in the banking system, Seyed Bahaeddin Hosseini Hashemi, a banking and monetary expert, stated.

“The amount of liquidity in private sector has become like a flood and it should be controlled through systems like OMO”, Tasnim news agency reported on Sunday, quoting Hashemi.

The expert further cited fixed prices, employment, and stability in forex market as some other potential results of the open market operation.

The Central Bank of Iran (CBI) officially launched an open market operation system on January 16, as part of its monetary policy to curb inflation, control interest rates in the interbank market and manage liquidity.

According to CBI Governor Abdolnaser Hemmati, the main purpose of the open market operations is to control liquidity and inflation in the market.

“Typically, central banks conduct open market operations or buy and sell securities to achieve their macroeconomic goals, namely inflation control and economic growth stability”, Hemmati wrote on his social media.

The main task of this system is the purchase and sales of government bonds, particularly short-term securities such as treasury documents with banks and credit institutions, the official explained. 

In general, OMO is a financial instrument through which central banks buy and sell securities in the open market to expand or reduce the money supply. 

MA/MA

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