Skopje, 24 July 2023 

"Central banks around the world are in the phase of conducting a tighter monetary policy, to deal with pressures on inflation and inflation expectations. Reduced or delayed consumption in periods of increased interest rates, amid simultaneous stimulation of savings, contributes to returning price stability in the long run, which is critical for the standard of living of the population. At the moment, global inflation slows down, but the risks are still present and there is a need for further vigilance”, said the Chief Economist of the National Bank, Aneta Krstevska, in an interview for Bloomberg Adria.

Krstevska explained that the tightening of the monetary policy by definition means lower consumption, in order to reduce inflation and inflation expectations. "We believe that in periods of higher inflation, we all better understand the importance of price stability, i.e. of low and predictable inflation rates. Constant inflation is caused mainly by global factors - the prices of food and energy, but with indirect effects on other prices and inflation expectations”, she said. 

Referring to the domestic context, Krstevska emphasized that inflation has been slowing down for eight months, while in the last few months it is also accompanied by a slowdown in core inflation, and there are positive trends in the dynamics and currency structure of deposits. Inflation is currently in line with the latest forecast of the National Bank, according to which this year inflation would be 8 - 9%, on average, annually (compared to 14.2% last year), and it will slow down also next year. Concerning the foreign exchange market developments, the Chief Economist of the National Bank pointed out that they were stable, and the foreign reserves were at a solid level.

Regarding the monitoring of the monetary signals by the banking system, Krstevska pointed out that according to the Bank Lending Survey of the National Bank, the responses received from the banks suggest an increased influence of the monetary policy on the policies of the banking sector. These responses correspond to the upward changes in the bank interest rates, including deposits, which enabled an appropriate acceleration in the deposit growth. “Changes in newly approved loans and newly received deposits were more significant, but in the course of time, that change became visible in total loans and deposits. The changes in deposit interest rates are gradual, but constant for several months, which indicates appropriate caution of banks for the interest yield of deposits, as their main funding source. In any case, the National Bank made gradual changes to the monetary policy, in order to avoid sudden changes in the economy”, Krstevska says.

Amid global uncertainty and increasing interest rates, same as in many other countries of the region and beyond, the credit growth from the beginning of this year slightly decelerated, but remains moderate (6.5% annually in May). “The National Bank made efforts also in these conditions to improve the structure of lending, by encouraging “green loans” to banks in order to support the energy transition of the economy. For this purpose, the National Bank in the past period adequately adjusted the set of available instruments, i.e. it continued to use the reserve requirement for unconventional purposes (release from reserve requirement for loans for renewable energy sources), followed by expansion of the banking portfolios with “green loans”, said  the Chief Economist of the National Bank.