Bank of Russia Liquidity Management of the Banking Sector: Observations Based on the Past Three Years Experience

Abstract

Short-term money market interest rate management within the framework of symmetrical interest rate band is based on central bank open market operations that aim to compensate for a structural deficit and surplus of liquidity in the banking sector to make sure that the money market overnight interest rate is close to the middle of the interest rate band. The Bank of Russia practice in this form of management amid structural deficit of liquidity over the past three years has shown that the period average money market interest rate has been above the key interest rate by more than 0.5 percentage points in half of 14 key rate periods.