THE INFLUENCE OF THE INSTRUMENTS OF MONETARY POLICY OF THE NATIONAL BANK OF POLAND ON THE LEVEL AND VARIABILITY OF SHORT-TERM RATES OF INTEREST

The National Bank of Poland influences the interbank market by means of three instruments: reserve requirements, standing facilities, and open market operations. This article describes the impact of these tools on short-term interest rates on the interbank market. Today the most important function of reserve requirements is to limit the volatility of short-term interest rates on the interbank market. They help to stabilise the overnight rate because the requirements are lagged and averaged. Standing facilities are safety valves for the banking system. Banks can use the credit facility when they urgently need liquidity or the deposit facility when they have surpluses. Simultaneously, standing facilities indicate the corridor of market rates volatility. These standing facilities' features allow them to limit the overnight rate volatility - as well as reserve requirements do. Open market operations are the principal instrument for maintaining short-term interest rates at a level consistent with the established inflation target implemented. The minimum interest rate for the main operation - issuing 7-day NBP money bills - is announced by the Monetary Policy Council. One-week interest rate on the interbank market fluctuates around this official interest rate.