Monetary Policy

Instruments of Monetary Policy

Open Market Operations

Open market operations pertain to the management of the money supply by the central bank’s purchase and sale of securities in the financial market and are its principal means of conducting monetary policy over the short- and medium term.  The main instruments of open market operations in Guyana are the 91-day, the 182-day and the 364-day Government treasury bills. The Bank of Guyana does not issue its own securities.  The government treasury bills are issued via an open market auction.  While the Bank does not actively engage in the repurchase of securities, it does maintain a rediscounting facility in the absence of a secondary debt securities market. 

Open Market Operations Framework

The open market operations of the Bank of Guyana are conducted within the framework of a reserve money program.  The reserve money program links the Bank’s balance sheet with the balance sheet of the banking system via the reserves maintained by the commercial banks with the central bank. It establishes, based on projections for inflation and growth, intermediate targets on the commercial banks’ reserves. By operating on the commercial banks’ reserve money balances, the central bank is able to influence the level of money available in the economy.

The Money Market Committee meets on a weekly basis to review the performance of the commercial banks’ reserves relative to the set weekly targets.  At these meetings, developments in the economy are considered, and based on the current and expected performance of inflation and the exchange rate, conditions in the foreign exchange market along with government’s financing requirements, the Committee decides on the performance of reserve money relative to its target, and the volume, if any, of treasury bills to be issued in order to achieve the set growth and inflation targets.