The financial markets cover money market, capital market and foreign exchange (FX) market. The NBU’s operations in the financial markets aim to achieve monetary policy goals. The regulator’s role consists of lending to banks, placing certificates of deposit (CDs), and buying and selling securities and foreign currencies. Through its operations, the regulator influences the cost of money and inflation through the transmission mechanism.
The NBU provides loans to banks on a regular basis and places certificates of deposit in an effort to keep interest rates in the interbank market at levels close to the key policy rate, set by the NBU.
A systemic deficit or surplus of liquidity in the market can have a significant influence on money market rates. When this occurs, the NBU can adjust the amount of liquidity through purchases and sales of government securities.
FX interventions in the interbank FX market are carried out to smooth fluctuations in the interbank FX market and accumulate international reserves.