CBM says banks won’t hike interest rates amid excess bank reserves


The banks will not hike the interest rate and there are excess bank reserves for now, according to a statement (9/2022) of the decisions of the Monetary Policy Committee of the Central Bank of Myanmar (CBM) meeting.
In order to tackle inflation, the committee considered whether it should raise interest rates or not.  The economic growth in the 2021-2022 financial year was 2.4 per cent, which is lower than the target of 3.7 per cent.
The committee decided at a meeting (5/2022) held on 30 May 2022 not to raise the interest rates as the country missed economic targets, cash deposits at the banks are declining, bank credit expansion still cannot happen and the currency in circulation of the banking industry just starts off.
For the ease of inflation, the committee made the Minimum Required Reserves (MRR) ratio remain unchanged at 3 per cent after mulling over banking operations.
The committee raised the current account balance (CAB) of the bank institutions at the Central Bank from 2.25 to 2.5 per cent and lowered the bank reserves (cash) from 0.75 to 0.5 per cent.
This way, the cash physically held by the banks will be deposited to the CBM and modifying reserve requirements will reduce the currency in circulation (CIC) and hope to steer the volatile inflation rate, as per the statement.
Additionally, bank reserves are exceeding at present. As the bank credit expansion cannot still happen, the committee decided to set an interest rate on the average excess CAB.
The statement said it will initially create an interest rate corridor for the money market. Furthermore, to steer inflation, the committee also discussed issuing the CBM Bill as a monetary policy instrument.
Regarding issuing CBM Bill, taking everything into account, advantages, procedures, setting face value and interest rate, types of issuing and payment methods were raised at the meeting and the committee determined to make the necessary preparations. — TWA/GNLM

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