Cen­tral Bank warns against com­plex­ity of tran­si­tion to in­fla­tion tar­get­ing

Azer News - - Nation - By Trend

Tran­si­tion to in­fla­tion tar­get­ing in Azer­bai­jan will take at least two years, Chair­man of the Cen­tral Bank of Azer­bai­jan (CBA) Elman Rus­ta­mov told Trend.

Rus­ta­mov be­lieves this is a very complex process that re­quires in­ter­a­gency co­op­er­a­tion, es­pe­cially in the fi­nan­cial sec­tor.

"The de­ci­sive part of the process is the ac­ti­va­tion of the in­ter-bank manat mar­ket, be­cause the in­fla­tion tar­get­ing is im­ple­mented through the tar­get­ing of in­ter­est rates. This is the world prac­tice.The devel­op­ment of the se­cu­ri­ties mar­ket is very im­por­tant in this is­sue," the CBA chair­man said.

He noted that, in turn, for the devel­op­ment of the se­cu­ri­ties mar­ket it is im­por­tant to es­tab­lish trust be­tween banks and to in­ten­sify liq­uid­ity trade at the ini­tial stage, and this re­quires a de­vel­oped col­lat­eral mar­ket.

"In this re­gard, re­cently, we have tre­men­dously ex­panded the is­sue of notes. This gives im­pe­tus to the devel­op­ment of the in­ter-bank mar­ket. In gen­eral, it is nec­es­sary to de­velop the mar­ket of gov­ern­ment se­cu­ri­ties. To­day, this mar­ket is very small," he added.

Ac­cord­ing to the State Sta­tis­tics Com­mit­tee, the in­fla­tion in Azer­bai­jan in Jan­uary-July 2018 amounted to 2.8 per­cent. The Cen­tral Bank plans to keep the in­fla­tion rate at 6 to 8 per­cent. The CBA Chair­man Elman Rus­ta­mov said ear­lier that the in­fla­tion will re­main be­low the tar­get by the end of the year.

Many in­ter­na­tional ex­perts agree that in the con­text of the global cri­sis, the in­fla­tion tar­get­ing has a great ad­van­tage due to its greater sta­bil­ity. The in­fla­tion tar­get­ing helps re­duce the volatil­ity of the econ­omy.

Many coun­tries that used in­fla­tion tar­get­ing be­fore the 2008 cri­sis did not change it to an­other mon­e­tary pol­icy.

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