Beac cuts liquidity to banks, to keep inflation low
(Business in Cameroon) – The traditional operation of weekly liquidity injection into commercial banks, carried out on March 29, 2022, by the Bank of Central African States (BEAC) offered only 180 billion FCFA, in instead of its usual offer of 250 billion FCFA.
This measure is part of the central bank’s restrictive monetary policy, which aims to reduce access to bank credit in the CEMAC zone. The Beac wants to keep inflation low. For 2022, inflation in Cemac is forecast at 3.6%, up 2.6% year on year, and up 0.6 percentage point compared to the European 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 raised 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 that the central bank obtains when it provides liquidity to commercial banks, for a period not exceeding 24 hours. This is generally the highest rate among central banks.
This strategy aims to make liquidity more expensive for commercial banks, thereby increasing the cost of bank credit. Consequently, access to credit will be restricted and monetary creation within the CEMAC region will fall.