OMO a crucial need for Iran’s banking industry

Financial Tribune – The Majlis Research Center has a positive opinion about the government decision to launch the Open Market Operation enshrined in the next fiscal that starts in March, calling the move “a critical necessity” to regulate lending by Central Bank of Iran.

The initiative is part of the proposed budget that says “in order to implement the monetary policy and control interest rates and inflation, the CBI will launch the OMO and trade in Islamic bonds issued by government, Banks can hold the bonds as collateral to borrow from the CBI.”

OMO is a financial instrument through which central banks buy and sell securities in the open market to expand or reduce the supply of money. Within OMO, the CBI buys government bonds to increase the money base (cash reserves), thereby reducing the inter-banking lending rates.