NBM Monetary Policy for 2006 included instruments meant to sterilise excessive liquidity

The National Bank of Moldova (NBM) has performed, during the year 2006, open market operations by issuing NBM Certificates and accepting deposits from commercial banks. These two efficient instruments of monetary policy are meant to sterilise the excessive liquidity of the banking system. According to the NBM Press Centre, the interventions of the National bank on the monetary market with sterilisation operations aimed at reaching its fundamental objective – the preservation of price stability. In this respect, during the year 2006 there have been issued NBM Certificates of a total cost of 6673 mln lei at their nominal value, with a maturity ranging from 5 to 28 days. The demand for these securities during the approved period was up to 6917.1 mln lei, being backed up by a supply of 7705 mln lei. The total value of NBM Certificates in use has been increasing, over the 2006 year, by 805 mln lei in comparison to the end of the 2005 year, representing as of December 31 946.7 mln. lei. The liquidity predominance on the market for a short term has determined the National bank to diminish its supply for deposits favouring the NBM Certificates. Thus, the National Bank's deposit operations run with other banks in 2006 have summed up to 3189.6 mln lei, with the lower index of approximately 28.8 per cent of the volume sterilised in 2005. Within open market operations, National Bank has proceeded to the increase in interest rates both for NBM Certificates and for deposits to outbalance the inflation expectations. Thus, the average annual rate of the interest for NBM Certificates issued in 2006 was 10.78 per cent in comparison to 3.14 per cent in 2005, while for deposits accepted from other banks – 7.21 per cent in comparison to 3.57 per cent in 2005. As a result of the implementation of these monetary policy tools of NBM, the outcome of the sterilisation operations has made up, as of late 2006, 1188.4 mln lei, an increase of 467.8 mln lei in comparison to the end of the 2005 year.