The Operative Monetary Policy Committee adopted a decision on increase in the interest rate of CB bills from 5.25% to 6%, on the session held today. This decision on additional increase in the reference interest rate was adopted for further inflation intensification, and especially for intensification of the core inflation rate.

Skopje, 6 March 2008

Press release of the NBRM

The Operative Monetary Policy Committee adopted a decision on increase in the interest rate of CB bills from 5.25% to 6%, on the session held today. This decision on additional increase in the reference interest rate was adopted for further inflation intensification, and especially for intensification of the core inflation rate.

Analyzing the increase in the annual inflation rate from 8.7% in January to 9.6% in February, the Committee stated that the main inflation driving force still were the prices of food, with annual lap of 18.7%, or contribution to the total inflation index of 74.5%. But, the Committee stated that the data for February except for notifying of the continuous inflation growth, they also notified of the strengthening of the inflation expectations evident by the larger scope of the price growth in the other groups of products and services. The so called core inflation, which excludes the influence of the growth in the prices of food and energy on the total price index, notified of this particular broadening of the number of products and services with increased prices. Thus, the core inflation in December 2007 amounted to 1.2%, in January, 2.6% this year, while in February it decreased to 3.2%. In the same time, this denotes that a gradual materialization of specific secondary effects on the level of inflation was underway, which came from the side of the demand, but also that there was a possible materialization of the psychological factor, which, without question, experienced certain intensification.

The pressures on the side of the demand mainly resulted from the intensified growth in the wages in almost all economy sectors and from the intensive credit growth. In the last quarter of 2007 nominal growth in the average paid wage per employee of 11.8% and real growth of 6.6% were registered. In January 2008 the annual growth rate of the banks' credits to the private sector increased to 40%, within which the annual growth in the credits to the households equaled 56%.

In the last few months the data notified that the trade balance registered increased negative balances.

Also, the National Bank Council adopted the amendments on the Decision on the methodology for determining the capital adequacy of banks. The amendments provided increase in the risk weigh for used overdrafts based on current accounts and used credits based on credit cards by natural persons, which means that the banks shall allocate larger share of their capital for such activity. The amendment was motivated by the fact that the credit exposure of banks to the sector "households" based on these credit products grew most intensively in the last two years, and 75% of such credit exposure was not collateralized. The purpose of the National Bank for using such prudent measure was to reduce the credit risk for the banking sector, which resulted from these credit products, to an acceptable level. This measure is expected to slow down the further credit expansion with such characteristics, and it may also influence towards specific decrease in the inflation pressures coming from the side of the demand.   

NBRM, once again, reminded that the fall in the inflation rate requires an adequate contribution by the other market participants also.

Governor's Office