Overnight rate drops as liquidity improves

The average overnight rate dropped to 6.69 per cent yesterday, signifying liquidity improvement in the economy.

The rate which hit the six-week high level of 8.83 per cent last week, started easing on Monday this week to reach few percentages less to the lowest rate of 3.6 per cent registered in February. 

Standard Chartered Bank said that the current range of overnight borrowing shows the sign of improved money condition in the circulation.

“Overnight ranged between six and ten per cent with liquidity conditions showing signs of improvement,” the bank said in its Daily market report yesterday. 

According to the Bank of Tanzania’s (BoT) latest monthly economic review, money supply went up in July compared to June this year, maintaining the upward trend since last year.

The central bank says the annual growth of extended broad money supply (M3) was 17.6 per cent in July 2013 up from 15.6 per cent recorded in June 2013 and 12.8 per cent recorded in the corresponding period in 2012.

While the liquidity condition improved, the inflation also has dropped to 6.7 per cent of last month, indicating robust economy growth and BoT easing tight stance on money supply.

However, National Microfinance Bank said overnight lending rates remained at 8.0 per cent but cautioned that the liquidity may tighten as the quarter ends, pushing demand for money by corporate. 

Overnight rates may also shoot up due to lack of confidence amongst banks, as was observed in the liquidity crunch of 2008.
Source: Daily News, reported from Dar es Salaam, Tanzania

 
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