The purpose of the new measures is to foster domestic saving and adapt
liquidity positions to the growth objectives within a more stable environment.

The president of the Central Bank of Venezuela, Gastón Parra Luzardo, announced the new monetary policy measures implemented by the Board of Directors for the second quarter of 2007. He said, “The purpose of these measures is to foster domestic saving and adapt liquidity positions to the growth objective within a more stable environment”. He added that the intention is to provide price stability and maintain the rate of growth recorded in the last few years. 

He indicated that regarding anti inflationary policy, the Government and the Central Bank have decided to intensify the coordination of their policies, which represents a great effort in the real as well as in the monetary and fiscal spheres.

In that respect, the Central Bank in its meeting dated July 10th, decided to take the following monetary policy measures, in force from July 16th, 2007:

Increase the minimum borrowing rate for the financial system from 6.5% to 8% annually for saving deposits, and from 10% to 11% for term deposits. Introduce 56 days term and eliminate the 14 days term in absorption operations made by the Institute. The 10% interest rate for 28 days term operations is kept, and a rate of 11% will be applied for 56 days term. Operations carried out with the official sector will be at 28 days and the current interest rate and methodology will remain in force.

Increase the required reserve ratio over direct obligations from 15% to 16%, as a first step, and to 17% as of October 1st, 2007.

Fix the reserve ratio over ceded investments in 13.75%. This ratio will weekly increase at a rate of 0.25% until reaching 17%.

The maximum lending rate for credits (28%), the conditions of injection operations, the discount rate and the reserve requirement on changes over direct obligations and direct investments are kept in the current conditions.

The decision taken by BCV’s Board of Directors is: a) in agreement with article 32 of BCV’ Law which establishes that during the first month of every quarter the Board of Directors of the Central Bank of Venezuela shall approve the monetary policy guidelines and b) forms part of the coordination process of the monetary, exchange and fiscal policies specified in the Annual Policy Agreement 2007 undersigned with the Government.

Gastón Parra Luzardo, president of the Central Bank also informed that the “Institute predicts that a favorable national and international environment will continue stimulating domestic economic growth during 2007 and 2008, according to a constant monitoring of a large number of indicators (monetary, fiscal, exchange, price, incomes, economic and social activity) that allows to timely adjust the instruments at its disposal.

Parra Luzardo concluded: “It is important to point out that the Central Bank of Venezuela will continue evaluating the economic and social development, and if necessary, it will implement additional measures.