“There has been a sharp decrease in the interest rates of the Central Bank’s notes. Thus, the last interest rate on 28-day notes, which was offered at 8.29 percent in August of last year, has now decreased to 6.60 percent. In the same period, 84-day notes decreased from 8.60 percent to 6.65 percent, and the final interest rate on 168-day notes decreased from 8.71 to 6.71. The last interest rate on 252-day notes decreased from 9.18 percent to 6.72 percent. As it can be seen, the yield level of all notes of the Central Bank has decreased.”
Publika.az reports that these words were said by Vugar Bayramov, a member of the Economic Policy, Industry and Entrepreneurship Committee of the Milli Majlis.
He added that there are several reasons for the decrease in interest rates:
“Before, the high-interest notes of the Central Bank “squeezed” other government securities, practically. He directly stimulated interest rate hikes in other government securities. This meant borrowing at a higher interest rate in the securities market. Second, after the Central Bank reduced the discount rate, interest rates on notes were expected to drop.
In practice, the most and perhaps the only direct influence of the discount rate at the moment is the interest rate of notes. Thirdly, with high-interest notes, the Central Bank was able to attract part of the passive assets of banks, thereby creating a demand for additional resources in financial institutions. Finally, it was clear that the Central Bank would not be able to keep the expensive notes in the sector for long in an ecosystem where interest rates were sometimes significantly lower than other government securities.
In addition to all this, the high-interest notes of the Central Bank created additional income opportunities not only for banks, but also for a number of other institutions. One of the other important and also interesting points is the increase in deposit rates in banks, despite the decrease of the last interest rate of the Central Bank on accounting and notes. “Decisions of the Central Bank are being followed by interest rate changes in the opposite direction in the banking sector.”
Aysel Shahmar
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