// definition
Monetary sterilisation
Offsetting an intervention’s liquidity effect
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Short definition
A central bank operation that offsets the effect of an intervention on banking-system liquidity. After buying foreign currency or gold with domestic currency, the bank can absorb the liquidity created, for example by issuing interest-bearing securities. The interest paid is a cost separate from the result of the initial purchase.
risk atlas
Knowledge map
Intuition
Buying reserves and absorbing the liquidity created are separate operations with separate costs.
Primary sources
- IMF, Bank of Ghana gold purchasesParagraphs 13 and 15: programme losses and reserve sterilisation costs.