DISCOUNT RATE AS TOOL FOR REGULATING INFLATION UNDER UNCERTAINTY UNDER UNCERTAINTY AND RISK

Abstract

The main task of the Central Banks of the world countries is developing monetary policy and implementing measures to control the level of inflation the result of which is the maintenance of the national currency stability level. The discount rate is a tool which Central Banks of the world use for regulating the inflation level which affects the coordination of the level of deposit and credit rates which influence the banks performances. Determining the level and nature of changes in the discount rate in the country depends on the trends of economic prosperity, the state of monetary and fiscal policies. In order to support the real sector of the economy, the Central banks of the world set the discount rate lower than the inflation rate. The article proves that at the end of 2019, the countries of the world faced a man-made catastrophe – the COVID-19 pandemic which greatly affected both the economies and social spheres of the countries. This crisis resulted in the reduction or general a stoppage of production and, therefore, a decrease in income or unemployment in many countries of the world which definitely led to a decrease in such macroeconomic indicators as GDP and the manifestation of an increase in the inflationary burden on the currencies purchasing power. The active phase of the impact of the COVID-19 pandemic has affected the countries of the world since March 2020, so during this period, in order to support business, 72 Central banks, at least once, changed their discount rate. It should be mentioned that the Central Banks (G20) during this period reacted competently and lowered the discount rates. The introduced balanced monetary policy of the Central banks of the world countries makes it possible to regulate and restrain the balance of the inflation level and, as a result, to avoid deflation processes and to keep the inflation level in a moderate range from 3% to 5% for GDP growth. Therefore, in compliance with the balanced monetary policy of the Central Banks of the world through the key rate, they can regulate the supply of credit, thus enabling the development of the countries’ economies.