The interbank market interest rate has remained at 24.00 percent for the fourth consecutive week in September. This stability in the interest rate sends a straightforward message from the glass building of Mirdamad to the entire monetary and financial network of the country. The placement of this market rate precisely at the ceiling of the interest corridor indicates the firm will of the policymaker to maintain a strict monetary contraction.
Thirst for Liquidity Shortage in Banks
When the weighted average of transactions approaches the ceiling of the corridor, it means that there is still a severe thirst for liquidity shortage among banks. The central bank clearly has no plans at this stage to release resources or open low-cost credit. Choosing this stabilization strategy at the highest permissible limit is a coordinated effort to curb inflationary expectations and stop the endogenous liquidity creation engine within the banking network.
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Consequences of Interest Rate Stabilization
The monetary policymaker has well understood that unrestrained injection of the monetary base into the overnight market or lowering the guiding rate to the floor of the corridor will quickly spill over into asset markets such as currency, gold, and housing. Therefore, maintaining the 24 percent anchor acts as a defensive barrier against the expansion of the monetary base. However, the inevitable consequences of this policy, such as high costs of attracting funds and severe credit constraints for production enterprises, will still remain.
Long-term stabilization of the rate at the permissible ceiling sends a clear message to the capital market and economic actors: the period in which "expensive money" will continue to be the main variable governing decision-making. For this reason, as long as excess withdrawals are not controlled and the open market cannot create a spontaneous balance between supply and demand for reserves, the central bank has accepted the risk of short-term recession or pressure on the stock market, but will not allow the interbank rate to send a signal of reduced contraction as a thermometer of the monetary temperature of the economy.
Thus, the 24 percent rate is not only not a natural equilibrium point, but a red line that Mirdamad has created to curb macroeconomic instabilities. This situation reflects the strong will of the policymaker to control the economic situation and prevent severe fluctuations.
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