Vice-governor Mitreska: The future steps of monetary policy are conditioned by inflation and the conditions of the foreign exchange market

Skopje, 19 March 2023

"It is a good sign that inflation is slowing down. In February, the annual price rise was about three percentage points slower than the October peak, and this pace of adjustment is similar to that in the euro area. The inflation pace is similar to the last National Bank forecast expectations of 8-9% on an annual basis. The underlying scenario includes assumptions of further world energy and food price reduction, gradual stabilization of inflation expectations, which is already happening, while financial conditions tightening should affect the demand-sensitive price index. If there are no contingent shocks in the coming period, we should see an inflation stabilization" said Vice Governor Ana Mitreska in an interview with Bloomberg Adria.

Vice-governor Mitreska also addressed the monetary policy led by the two globally important central banks - the US Federal Reserve and the European Central Bank. Last week, the ECB reportedly raised interest rates by additional 0.5 percentage points, while the Fed has recently highlighted the likely need for tighter monetary policy, due to tighter labor conditions and still insufficient inflation slowdown. The future path, as she indicated, will depend on the latest assessments of the economic and financial conditions in these economies. Whether the latest external financial market developments will affect expectations for the economic indicators and thus the monetary position of these two central banks and to what extent, will be seen in the next period.

"The future National Bank moves and changes in monetary policy will depend on the inflation, but also on the foreign exchange market, given that we operate under a fixed exchange rate regime, which is the nominal anchor and basis of the overall stability of our economy. We are witnessing some stabilization on both fronts, but risks still exist. Certainly, the behavior of the European Central Bank will also influence our interest rate policy. It is necessary to systematize all new available information and assessments about the domestic economy and the external environment which will be a basis for the next steps in the monetary policy", says Vice Governor Mitreska.