Liquidez do Sistema e Administração das Operações de Mercado Aberto

In the inflation target program in Brazil, the Committee of Monetary Policy (Copom) defines the objective for the interest rate (Selic) to manage inflation. The Central Bank uses open market operations to keep Selic near to its objective. The historical data shows that Selic is systematically below the Selic objective defined by the Committee. In this work it is presented a stochastic control model to discuss the empirical observation. The model shows that in situations where there is more tolerance with liquidity excess, the differential between Selic and its objective will be negative. So, the empirical observation may be explained by the tolerance with excess of liquidity in the system. This motivation for this tolerance is discussed in this work. Furthermore, it is also discussed that the central bank may administrate the volatility of the differential between Selic and its objective. This administration depends upon the central bank’s monetary policy objectives.