The Croatian National Bank (HNB) Council has decided to cut the central bank's Lombard rates from 5% to 2.5% and its discount rates from 7% to 3% annually.
"The interest rate on Lombard loans was lowered from 5 to 2.5 percent annually and the discount rate from 7 to 3 percent annually. The interest rate on short-term liquidity loans was cut from 5.5 to 3.5 percent for loans used up to three months and from 6 to 4 percent for loans used more than three months and the remuneration rate on the insufficiently allocated or maintained amount of reserve requirements was reduced from 12 to 8 percent," the central bank said in a statement.
"We want to limit pressures on interest rates and the kuna expected due to an increased demand for the kuna amid the conversion of the Swiss franc loans into euro-denominated ones," Reuters quoted the bank as saying.
"With this move, (the HNB), while continuing to pursue a policy of maintaining comfortable liquidity in the banking system and exchange rate stability, intends to contain upward pressures on money market interest rates and downward pressures on the exchange rate, expected due to an increase in demand for kuna liquidity caused by the conversion of Swiss franc loans pursuant to the recently adopted Act on Amendments to the Consumer Credit Act. The same reason applies to the reduction of the discount rate which, while not having a significant impact on domestic monetary developments and no longer being used for the calculation of the statutory default interest rate, indicates an overall reduction in market interest rates."
"In the period from early January to mid-October 2015, the average interest rate on kuna overnight interbank loans was 0.47%. The banks' overnight lending rate averaged 0.5% and the deposit rate stood at 0.34%," the bank said in the statement.