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Yaoundé - 26 June 2022 -
Finance

Beac cuts liquidity to banks, to keep inflation low

Beac cuts liquidity to banks, to keep inflation low
  • Comments   -   Thursday, 31 March 2022 16:34

(Business in Cameroon) - The traditional weekly liquidity injection operation in commercial banks carried out on March 29, 2022, by the Bank of Central African States (BEAC) only offered CFA180 billion, instead of its usual offer of CFA250 billion.

This measure aligns with the central bank’s restrictive monetary policy, which aims to reduce access to bank credit in the CEMAC zone. Beac wants to keep inflation low. For 2022, inflation in the Cemac is forecasted at 3.6%, up by 2.6% YoY, and up by 0.6 percentage points compared to the EU standard (3%).

The Central Bank also raised two of its main interest rates. The Tender Interest Rate (TIAO), which represents the remuneration it receives for providing liquidity to commercial banks, was increased from 3.5% to 4%, up 0.5 points. The Marginal Lending Rate was raised from 5.25% to 5.75%. This rate is the remuneration the central bank gets when it provides liquidity to commercial banks, for a period not exceeding 24 hours. It is usually the highest rate among central banks.

This strategy is aimed at making liquidity more expensive for commercial banks, thus increasing the cost of bank credit. As a result, access to credit will be restricted and money creation within the Cemac region will drop.

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