Sat, Apr 14, 2012 - Page 12 News List

Interbank rate soars after price hikes

By Kevin Chen  /  Staff Reporter

The overnight interbank interest rate surged by 2.7 basis points yesterday, the largest daily rise since April 5, central bank data showed yesterday. The overnight interbank rate was 0.485 percent, compared with 0.458 percent a day earlier, data showed.

During the first four days of this week, the central bank had kept the daily rise of the overnight interbank rate at between 0.1 and 0.2 basis points, data showed.

However, the rate has increased by 8.5 basis points since March 12, when it was 0.400 percent, a move that reflects the central bank’s attempts to absorb excess liquidity in the market in order to curb potential inflationary pressures.

The surge in the overnight interbank rate came after the Ministry of Economic Affairs said on Thursday it plans to raise electricity rates next month and after it announced earlier this month that domestic fuel prices would be increased by more than 10 percent, triggering expectations of rising inflationary pressures.

The bank usually uses open market operations, such as overnight interbank interest rates and issuing certificates of deposit, to adjust market liquidity on a regular basis.

However, it has left its policy interest rates unchanged for three straight quarters. It announced on March 22 that it would keep its discount rate at 1.875 percent, the collateralized loan rate at 2.25 percent and the unsecured loan rate at 4.125 percent.

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