Increase in discount rate may become a problem for these banks

17:03 - 29.03.2023

March 29, Fineko/ "Raising the discount rate by the Central Bank is a step taken to combat inflation."

ABC.AZ reports that economist Ekrem Hasanov said about this, when commenting on the decision of the Central Bank to raise the discount rate.

The economist noted that CBA’s discount rate is the interest rate on a loan provided to banks:

"The Central Bank is struggling with this price increase. That is, it increases the interest on the loan so that banks issue a loan at a higher interest rate, take out a loan less, reduce the amount of money in circulation. Thus, indirectly, it is possible to prevent price increases to some extent. Most central banks use this tool to prevent prices from rising. But the result of this is ambiguous. We have large monopolistic banks that have a lot of money. They never know what to do with this money, where to invest it. But an increase in the discount rate may become a problem for small and medium-sized banks."