Banco de Cabo Verde
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Monetary Policy Implementation

The key variable in monetary policy implementation is the operational goal. The choice of this goal depends not only on the Central Bank's strategy but also on the financial system’s development level.

Along with the reserve requirement rate, reference interest rates, lending and absorption interest rates also play an important role in the operational framework due to the exchange rate regime and the gradual liberalization of capital movement. Also taken into account is the development of Euribor rates, which are relevant instruments in the Eurozone.

BCV designates its interest rate (policy rate) to intervene in money market operations, and this rate must keep up with the evolution of interest rates in the Eurozone as much as possible. Thus, monetary policy implementation is a process that seeks to, on one hand, ensure good management of the system’s liquidity through the reserve requirement rate and, on a different level, via key interest rates, ultimately to ensure a level of reserves that is compatible with the protection of the currency peg and maintenance of price stability.