On June 11, 2013 a regular meeting of the Operational Monetary Policy Committee was held, with focus on the recent macroeconomic indicators, trends in international and domestic financial markets in May 2013, and liquidity in the banking system.
On June 11, 2013 a regular meeting of the Operational Monetary Policy Committee was held, with focus on the recent macroeconomic indicators, trends in international and domestic financial markets in May 2013, and liquidity in the banking system.
Recent data on the euro-zone showed a decline in the economic activity in the first quarter, and the recession is likely to continue also in the second quarter of the year. However, according to the latest assessments of the ECB, real GDP is expected to recover in the second half of the year, mainly due to the positive influence of exports driven by the gradual growth in external demand, particularly in the United States. Additionally, favorable influence on domestic demand is expected also as a result of the support by the monetary policy and the progress regarding fiscal consolidation.
Liquidity in the banking system in the country remained on a relatively high and stable level also in May, with banks actively using the monetary instruments available. Confidence among market participants on the money market remained on a high level, while interest rates continued their downward trend. As a result of the usual seasonal movements, the foreign exchange market registered a moderate reduction in turnover.
At the meeting of the Committee the latest macroeconomic indicators were also discussed, in the context of their effects on the monetary policy stance. It was estimated that the most recent macroeconomic developments do not differ significantly from the April projections. Recent indicators of economic activity and assessments of the factors of growth in the next period suggest retaining the current estimates for economic growth in 2013. It is further expected that the recovery will not be strong enough to cause major pressures in the economy through the demand channel. Temporary high price increase in April, partly due to the transmission effects from the floods, was already exhausted in May. Inflation performance in the period April-May is within the projections, and for the time being inflation is not expected to deviate from the projected path for 2013. Foreign reserves in the second quarter declined, which is a common seasonal movement, and it is within the projections. Recent assessments of the external position of the economy further suggest room for increasing the foreign reserves by the end of the year. Estimated reserves adequacy indicators point to a level of foreign reserves in the future, sufficient to address potential, unforeseen shocks. Regarding the latest preliminary monetary data, as of May intensification in the credit market was noticed, which indicates the possibility of achieving the expected credit growth for 2013. However, given the uncertain environment, the banks' perceptions of the risks still play a major role in determining the volume of new lending, and the credit growth projection remains to be accompanied with downward risks. In this direction is the monetary growth dynamics, which according to the latest data is lower than expected. Given these movements, according to the announcements, in the following period NBRM will assess the need of taking additional measures to stimulate credit growth.
Despite the relatively favorable movements from the monetary viewpoint, the risks for the monetary policy still persist. While overall inflation is estimated to remain within the projection and within acceptable parameters, core inflation remains high signaling relatively high transmission effects from the increase in the prices of food and energy on other prices in the economy.
Taking into account the latest economic and market indicators, at the meeting of the Committee it was decided to maintain the maximum interest rate on CB bills at the level of 3.5%, and to offer CB bills in the due amount (Denar 24,020 million) at the auction. NBRM will continue to closely monitor future macroeconomic developments and the possible materialization of risks, and to appropriately adjust the monetary policy, if necessary.