On February 12, 2013 a regular meeting of the Operational Monetary Policy Committee was held, which focused on discussing the data on the banking sector as of December 2012, the movements on international and domestic financial markets in January 2013, the latest macroeconomic data on the domestic economy and the banking system liquidity.
Press release of the NBRM
On February 12, 2013 a regular meeting of the Operational Monetary Policy Committee was held, which focused on discussing the data on the banking sector as of December 2012, the movements on international and domestic financial markets in January 2013, the latest macroeconomic data on the domestic economy and the banking system liquidity.
December data on the banking system show growth of the deposit base, with simultaneous moderate monthly growth in the credit activity. Banking sector liquidity is consistently high, and at the same time, according to the preliminary data, increased efficiency of the banks and moderate reduction in non-performing loans have been registered.
Globally, a gradual resolution of the sovereign debt crisis and restoring of the confidence in the financial markets in the euro area have been evident. Moreover, business confidence indicators in many sectors show that the Euro-region could emerge from recession in the first half of the year, which will positively affect the global economy. On the other hand, the risks to economic activity in the Euro area are mostly downward and refer to the possibility of a weaker domestic and export demand and slow implementation of structural reforms.
In January 2013, growing interbank activity was registered in the domestic financial markets. The turnover on the deposit market had a relatively high growth on a monthly basis, with the transactions with overnight maturity being most frequent. Transactions with longer maturities (1 week and 3 months) had a relatively high share in the total turnover, suggesting maintained high confidence among market participants in this segment of the financial markets. Market movements on the foreign exchange market were stable, while on the interbank market a moderate growth in the supply of foreign currency was registered. In such circumstances, the National Bank purchased foreign currency from the market makers.
Recent macroeconomic indicators point to a stable environment for the monetary policy conduct. Inflation data for January 2013 indicate slowing inflation, with the annual growth of the price level of 3.8% being slightly slower compared to the latest projections. Foreign reserves have been growing since the beginning of the year, indicating a favorable balance of payments position. The growth of foreign exchange reserves is caused by the net purchase on the foreign exchange market, but also by the net inflows of the government based on external borrowing. The growth dynamics of foreign reserves is in line with the expectations, with the foreign reserves being further maintained at an adequate level, sufficient to absorb any adverse shocks. Preliminary data on the credit market for January indicate still "anemic" lending activity, which in conditions of high liquidity in the banking system, points to the still present perceptions of risk and restraint from greater lending.
Overall, recent data point to current economic and financial conditions, which, so far, are in line with the expectations. Volatility and unpredictability of the world prices of primary products, and the still uncertain external environment remain the main sources of risks. Having in mind the monetary easing made through the reserve requirement and the maximum interest rate on CB bills at the beginning of the year, the monetary policy stance is assessed as appropriate. Of course, if favorable trends in foreign reserves and inflation continue in the forthcoming period, the monetary policy will be adjusted accordingly.
Considering the latest macro-economic, market and financial indicators, at this meeting of the Committee it was decided the maximum interest rate on CB bills to be maintained at the level of 3.5%. In circumstances of maintaining the banking system liquidity stable and at an adequate level, at the meeting it was decided to offer CB bills in the due amount (Denar 24,020 million) at the auction.