CBN Governor Charles Soludo said the ultimate goal of the new framework was to achieve a stable value of the domestic currency through stability in short-term interest rates around an operating target.

He said that the new measure was introduced in view of the "persisting unsavoury conditions and the need for the CBN to execute its mandate of attaining bank soundness and effective liquidity management".

"The operating target, otherwise called the Monetary Policy Rate (MPR) will serve as an indicative rate for transaction in the inter-bank money markets," he said.

He said the MPR, would now replace the Minimum Rediscount Rate (MRR), and will be set at 10 per cent, using the current rate of inflation and the expected inflation rate outcome of nine cent as a guide to ensure that interest rates remain positive in real terms.

The CBN governor said that the main operating principle guiding the new policy was to control the supply of settlement balances of banks and motivate the banking system to target zero balances at the CBN through an active inter-bank trading or transfer of balances.

Nampa-AFP

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