The Central Bank’s Monetary Policy Committee has decided to reduce the primary reserve requirement of commercial banks from 14% to 10% of prescribed liabilities.

This measure will take effect from the reserve week beginning July 24th 2024.

In a statement, the Bank says the Committee examined the recent decline in excess reserves of commercial banks – the deposits held by banks at the Central Bank in excess of the required reserve ratio of 14% of prescribed liabilities (deposits and short term borrowings).

It says the daily average of excess reserves measured $2,766 million from July 1st to July 18th 2024 compared to $3,914 million in June 2024.

The Central Bank’s statement says “The MPC reaffirmed the appropriateness of the overall stance of monetary policy, as articulated most recently in its June 28, 2024 Monetary Policy Announcement. At the same time, the Committee considered that, in the current circumstances, a lowering of the reserve requirement, accompanied by greater reliance on open market operations (the purchase and sale of securities by the Central Bank to affect liquidity), would have an immediate impact on liquidity. This combination is also consistent with the Central Bank’s longstanding objective of progressively moving towards more market-determined instruments of monetary policy.”