THE Bank of Tanzania (BoT)
THE
Bank of Tanzania (BoT) will continue pursuing prudent monetary policy
in 2016/17 to keep inflation close to the medium-term target of 5 per
cent, while ensuring that liquidity level is consistent with demands of
various economic activities.
According
to the bank’s monetary statement for the period ended June, this year,
the bank will continue to deploy a mix of monetary policy instruments,
while ensuring that money market operates efficiently towards sustaining
stability of short-term interest rates.
The
financial market will continue to be strengthened in line with the
objective of widening participation and deepening financial markets
instruments to facilitate better and efficient price discovery.
The
bank will also implement reserve averaging framework that will provide
flexibility to banks in managing liquidity more efficiently and thus
help to reduce volatility of short-term interest rates.
The
bank will continue to improve the monetary policy framework by
solidifying its role in stabilisation of banks’ free reserves. Further,
the BoT will enhance information sharing with banks to improve the
functioning of the money market.
Also
BoT will continue to monitor monetary aggregates cautiously and review
them when need arises. Interest rates will continue to be determined by
market forces with Treasury bills market being an anchor.
The
bank will continue to work closely with market players to improve
transparency of monetary policy operations and instil greater efficiency
in the determination of market based interest rates.
This
will further improve the function of the money market and reduce
volatility in the interbank cash market, while increasing the role of
interest rates in the transmission of impact of monetary policy actions.
The
exchange rate will continue to be market determined, with the bank
participating in the foreign exchange market for liquidity management
purposes and intervening occasionally to smooth out excessive short term
volatility in the exchange rate.
This will be done while ensuring that foreign exchange reserves are maintained at not less than four months of import cover.
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