The Council of the National Bank of Croatia decided to reduce the required reserve ratio by 2 percentage points, that is from 33.85% to 31.85%, starting from July 7, 1997. This was one of the most important decisions made by the Council of the National Bank of Croatia chaired by Governor Dr. Marko Škreb at its meeting on Wednesday, July 2, 1997.
The Council reviewed economic and monetary developments in the first half of this year and considered the adoption of adequate monetary policy measures for the next quarter of the year. Available indicators confirmed that stability continued to be the salient feature of the country's macroeconomic framework. Retail prices in June were 0.2% higher than in the previous month, and 3.4% higher than a year earlier, while the cost of living went up by 0.4% compared to the previous month, and 4% compared to a year ago. Producer prices in June were 0.2% higher than in May, and 2% higher than in June 1996.
The exchange rate of the kuna continued to be stable in June, except for minor fluctuations. In summer months the stability of the exchange rate shall be supported by higher interventions of the National Bank of Croatia in the foreign exchange market. The purpose of these interventions is to prevent the appreciation of kuna, which might be caused by increased foreign currency supply, and to facilitate the purchase of foreign currency flowing in from tourism. It is expected that due to aforementioned interventions international reserves will show a usual seasonal increase.
In terms of monetary indicators, special attention was given to the data providing evidence that, for the first time, domestic currency savings, primarily time deposits, showed higher increase than foreign currency deposits, not only in percents but also in real terms. Should this tendency continue, it could be concluded that three years after the introduction of kuna and its model stability, the turning point has been reached in the process of gaining a lasting confidence of domestic savers. Another significant financial indicator that captures attention is a new decrease in lending rates of commercial banks on kuna loans. Thus, the average interest rate amounted to approximately 15.8% in May, which is the lowest value in the past 29 months. The average spread was reduced in May to 11.4 percentage points.
The National Bank of Croatia took part in the preparations for an effective and quality accommodation of tourists by excercising tighter control of exchange offices. In May and June the inspectors examined the operation of 76 exchange offices located mostly in the Zagreb area and in Dalmatia. In next months the National Bank of Croatia shall continue to exert strict control over the operation of exchange offices.
Members of the Council were informed about the audit of business performance of the National Bank of Croatia in the past year. The audit was conducted by auditors of the State Auditing Office. It was noted with pleasure that state auditors had no negative remarks related to the overall business performance of the National Bank of Croatia, that is, to its compliance with relevant legal and other provisions.
In addition, the Council approved the nominations of Mr. Darko Nesek for Chairman of the Management Board of Ilirija Banka Zagreb and Mrs. Olga Gračanin for Member of the Management Board of the same bank. The Council also approved the nominations of Mr. Boris Ninić for Chairman of the Management Board of Trgovačka Banka Zagreb and Mrs. Slađana Jagar for Member of the Management Board of the same bank. Further, the Council agreed on the nomination of Mr. Zdravko Brestovac for Chairman of the Management Board of Štedionica Slavonija Zagreb.
At the Wednesday meeting the Council of the National Bank of Croatia gave its approval to "IKOM", a factory and mint of non-ferrous metals, for minting two types of gold medals "Vukovar", which are not regarded as gold money. The Council authorized the mintage of thousand pieces for each type of the Vukovar gold medal. The designer of these medals, which will differ in size and weight, is Mr. Stjepan Divković, an academy-trained sculptor.