NBS increased reference interest rate to 10%

The Executive Board of the NBS has increased the reference interest rate from 9.5% to 10%, the NBS announced.

Although the inter annual inflation in April was around the lower limit of inflationary target, from May it is expected to moderately grow towards the goal. This increase will be a consequence of growth of import prices, the arrival of the new agricultural season as well as the growth of regulated prices in the second half of the year. According to the projection of the NBS, the inflation will be around the upper limit of the the allowed deviation from the target in the end of this year and early next year. Bearing this in mind, the Executive Board of NBS decided to increase the reference interest rate to 10%.

NBS Executive Board recalls that the degree of restrictiveness of monetary policy in the future will depend mainly on the speed of adoption, intensity and implementation of the program of fiscal consolidation, with the continuation of arrangements with the IMF.

In order to continue to support the financial stability, the Executive Board of the NBS has made the following decisions at today's meeting:

- to maintain the existing rates of foreign currency required reserves, but with increasing participation of the Dinar share of allocating foreign currency reserve requirement from 20% to 27% with up to two years on the deposited resources, and from 15% to 19% of the deposited resources over two years.

- to increase the reserve rate for dinar requirements indexed in foreign currency clausal to 50% for all depositions.

These measures should reduce the difference between the cost of borrowing in dinars and foreign currencies, contribute to the stabilization of the change in the foreign exchange market and further promote the long-term borrowing in the future.

The next session of the Executive Board will be held on July, 12, 2012, when it will be decided on the reference interest rate.