Country Report Myanmar January 2011

Outlook for 2011-12: Monetary policy

The willingness of the central bank to print money to finance the government's deficit means that monetary policy is in practice unavailable as a tool with which to steer the economy. Reflecting this, the bank rarely makes changes to official interest rates. The last time that it altered rates was in 2006, when it made the first adjustment for five years, raising its leading indicator rate by 2 percentage points, to 12%. Despite rapid inflation in 2006-08 and recent signs of renewed inflationary pressure, there have been no further changes. The central bank remains reluctant to tighten monetary policy aggressively, as it is not operationally independent from the government and is under pressure to avoid measures that would increase the public sector's debt-servicing burden.

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