The Central Bank of The Gambia (CBG) adopts a monetary targeting framework that focuses on reserve money as the operating target and broad money the intermediate target. The Bank sets targets for key monetary aggregates in line with its inflation objective.
To meet the reserve money target, open market operations (weekly auctions of Central Bank Bills) continue to be the major tool for liquidity management. Other complimentary policy tools including foreign exchange intervention and the statutory reserve requirement ratio may be used. In addition, Monetary Policy Committee meets every quarter to signal the monetary policy stance of Bank by setting the key policy rate.
In September 2018, the Bank added to its toolbox an interest rate corridor with the objective of improving liquidity management and the transmission of monetary policy. The interest rate corridor consists of overnight standing lending and deposit facilities. The Standing Lending Facility (SCF) is an overnight lending facility that provides funds to commercial banks at a predetermined interest rate to cover end-of-day liquidity shortfalls. The Standing Deposit Facility (SDF) is an overnight deposit facility that allows commercial banks to place excess funds at the Central Bank for remuneration at a predetermined rate. The rates are subject to review by the Monetary Policy Committee (MPC) of the Central Bank.