The conduct of monetary policy

Institutional framework and objectives

SAMA is entrusted with the conduct of monetary policy. With a pegged exchange rate regime in Saudi Arabia, targetting the exchange rate in an open economy makes monetary policy subservient to exchange rate policy. Any decoupling of riyal interest rates from dollar interest rates (particularly in the event of lower riyal rates) tends to provoke an outflow of foreign exchange with an adverse impact on official foreign exchange reserves. The operational target

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