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To: goldsnow who wrote (14130)	7/6/1998 9:39:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116764

''If we are lucky then maybe we will get something on gold (reserves) or a minimum reserves requirement,'' ECB seen setting minimum reserves rules Wednesday 11:09 a.m. Jul 06, 1998 Eastern By Thomas Atkins FRANKFURT, July 6 (Reuters) - As European monetary union approaches, the European Central Bank is likely to reveal its future minimum reserves policy at Wednesday's planned news conference, analysts said on Monday. The ECB conference is set for 0900 GMT on Wednesday, after Tuesday's regularly scheduled council meeting. Senior economist at Deutsche Bank Research in Frankfurt, Werner Becker, believes it highly likely that the ECB will make an announcement on its minimum reserves policy. Citing unnamed sources within the European System of Central Banks, Becker said he expected the ECB to announce low minimum reserves requirements that pay a return close to the money market rate. A minimum reserves policy calls for banks to lodge a certain percentage of their funds with the central bank. This in turn gives the central bank better control over the level of funding available to the economy. Commercial banks in EMU-participating countries consider the minimum reserves question vital to their competitive positions. If they are forced to hold non-interest-bearing reserves with the ECB, it will boost costs and erode margins. Whatever the ECB decision, banks need time to prepare, Becker said. Many analysts expect the ECB to implement some structure forcing banks to hold minumum reserves, although the amount of required may be very low or even zero. ''Minimum reserves is the Number One question for the ECB,'' agreed West LB analyst Irgeen Rust. Rust also believes it possible for the ECB to reveal its minumum reserves policy on Wednesday. Chase Manhattan economist Hans-Guenther Redeker also thinks some minimum reserves news possible but says the ECB is more likely to stick to administrative matters. ''Administration is the main thing they have to stress at this meeting -- but you could get some commentary on the sidelines,'' he said. Other monetary strategy decisions are also important but fall a distant second to the question of minimum reserves. ''If we are lucky then maybe we will get something on gold (reserves) or a minimum reserves requirement,'' said PaineWebber chief economist Alison Cottrell. But it is far too early, Cottrell says, to expect statements about monetary strategy -- whether the ECB will use money supply targeting or inflation targeting or a mix of both in formulating crucial monetary policy. ''The last thing you want to do is to stand up now and say that you're going to target this and then you end up later tarteting that,'' Cottrell said. The ECB may also use the media forum to hammer home its views on the need for responsible fiscal policies. ''Duisenberg should take the opportunity to throw his weight around a little bit,'' Cottrell said. ''Otherwise it's going to make the ECB's job harder.'' Redeker also said it was likely that ECB officials will take a tough line on this issue. ''They would like to see where the peripheral countries could do more on fiscal tightening,'' he said. ECB chief economist Otmar Issing this weekend observed that when better-than-expected economic developments were factored in, many countries appeared to be putting in a worse fiscal performance this year than last. ((Frankfurt Newsroom +49 69 756525, frankfurt.newsroom+reuters.com))