Central bank reduces the required reserve ratio from 30.5 to 28.5 percent

Published: 5/4/2000

At its meeting held on Wednesday, April 5 2000, the Council of the Croatian National Bank, chaired by Governor dr. Marko Škreb, decided to reduce the required reserve ratio from 30.5 to 28.5 percent. The decision will result in about 200 million kuna being set free, but will not pose any threat to macroeconomic stability due to the lower level of liquidity credits to banks and decreased government borrowing with the central bank. The adoption of the government budget with reduced expenditure items (in nominal and real terms) mitigated the uncertainty and provided the central bank with an opportunity to implement the monetary policy stance opted for already in December last year, when the CNB Council, determining the monetary policy guidelines for 2000, emphasized that fiscal adjustment is a precondition for the reduction of the required reserve ratio and interest rates.

The latest indicators confirmed tendencies of downward movements in interest rates. In the last four months, the average weighted interest rate on the Money Market fluctuated between 12.4% and 12.8%. Commercial banks' interest rates on kuna loans also trended downwards to reach about 12% recently. In order to support these movements additionally and, also, expecting further positive reactions of commercial banks, the Croatian National Bank decided to reduce central bank interest rates. Thus, the Lombard rate was reduced from 13 to 12 percent, the interest rate on intervention loans from 19 to 18 percent and the discount rate from 7.9 to 5.9 percent annually.

At the Wednesday meeting, the CNB Council adopted the report on international reserves management in 1999. Also, the Council agreed with the nomination of Mr. Tomislav Vuić for chairman of the management board of Trgovacka banka d.d. Zagreb.