Increased interest for open market operations

Published: 8/6/2005

At its Wednesday session, chaired by Governor Dr. Željko Rohatinski, the CNB Council analysed recent economic and monetary developments, reviewed a report on the state of the banking system in the first quarter of this year and passed several decisions on matters falling within its field of competence. The session was also attended by the Finance Minister, Ivan Šuker.
The Council also analysed the initial effects of the measures adopted at the extraordinary session held on May 18. The exchange rate has risen from the then recorded HRK 7.29/EUR to HRK 7.34/EUR. On the auction held on Monday, June 6, the central bank purchased EUR 56.6m, the total amount offered, at an average exchange rate of HRK 7.3356/EUR, releasing an approximate HRK 415m. Interest rates have held steady. In a situation of high banking system liquidity, banks have daily deposited about HRK 1bn with the central bank, unable to place these amounts otherwise, while the nine auctions held saw only negligible bids, or no bids at all, as open market operations received only minor interest due to the liquidity surplus.
On today's auction, held on the same date when banks first calculated and allocated reserve requirements and marginal reserve requirements to comply with the measures enacted in May, they finally became interested in this monetary policy instrument. Of HRK 1.71bn worth of T-bills offered by banks, the central bank purchased HRK 1.34bn, at an average interest rate of 3.68%.
In view of this, and considering economic and financial circumstances prevailing at the time the said measures had been passed, the CNB Council reiterated its view that they had been justified. It was emphasised, however, that their impact would remain only short-term and limited unless economic and fiscal policy measures were taken to effect fundamental structural changes and reduce fiscal deficit. This was seen as a prerequisite for an ongoing reduction in both domestic and foreign borrowing and for eliminating direct or indirect appreciation pressures on the exchange rate.
The CNB Council also approved the appointment of Marina Vidič as management board member of Istarska kreditna banka Umag d.d., proposed by the bank's supervisory board, as well as the appointment of Ljiljana Horvat as management board member in Međimurska banka d.d. Čakovec.