Improving National Economy a Priority for CBI

Governor of Central Bank of Iran. Abdolnasser Hemmati. says the government will exert every effort to improve the national economy. as a top priority urged by the Leader of Islamic Revolution.

Hemmati said curbing the inflation is high on CBI’s agenda in a bid to achieve such a goal. adding that Iran has sufficient foreign exchange reserves to overcome any turbulence in the currency.

Controlling the currency rate is the key step since turbulence in this market will have the worst impact on the economy.

The top banker underscored the role of the newly launched Open Market Operation and changes in the CBI monetary policy to rein in galloping inflation.

He reiterated that CBI measures. however. should be accompanied by adopting effective and supportive policies to boost the non-oil sector of the economy.

Open Market Operation is a financial instrument through which central banks buy and sell securities in the open market to expand or reduce the money supply.

Within this framework. central banks can buy government bonds to increase the money base (cash reserves) and by extension curb inter-banking lending rates.  By the same token. selling government bonds reduces the base money and raises interbank rates.

It constitutes a key instrument of monetary policy under the market-based system of monetary management. Essentially. it is used by monetary authorities to regulate the cost and availability of credit in the banking system and influence the level of the money supply. 

In addition. within the framework. banks can hold bonds as collateral to borrow from the CBI.

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