Taking a leaf from developed markets, Central Bank is launching its open market operations for the overnight money market next Monday.
Open market operations gives the Central Bank more control over the overnight market.
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rnThe bank controls market activity by influencing the short-term rates at which banks borrow or lend depending on whether they have a liquidity surplus or shortfall, says Central Banks Deputy Governor, W A Wijewardene in an interview. rn
rnWhen the market is unable to supply the banks needs, commercial banks go to the Central Bank to sell excess cash or buy additional cash. rn
rnldblquote This is done through the reverse repurchase (reverse repo) window, which lends to banks that need cash and the repurchase (repo) window, which can be used to park excess money, dblquote explains Wijewardene. rn
rnThe repo rate currently stands at 9 percent, while the reverse repo window lends at 11 percent. rn
rnldblquote The repurchase rate and reverse repo will serve as upper a