When we refer to excess liquidity, it means simply that the level of liquidity has exceeded a threshold. When can we reasonably affirm that a country is facing a liquidity situation?
The surplus of excess liquidity growing over the long term can be a cause of monetary concern to the Central bank, posing the risk of triggering inflationary pressure in the economy. This is according to Afrasia Bank’s Head of Treasury Mr. Jen Ramanah in an interview. He was speaking on the impact of excess liquidity hinging on financial stability. According to him, the banking regulator must resort to Open Market Operations and issuing security to mop up surplus on the market. Mr. Ramanah affirms the need to contain excess liquidity by resorting to the appropriate monetary policy that will in the long term be less risky to the economy rather than letting a situation of money overhang for a protracted period.Source: Lexpress