Interest rate on CB bills and deposit facilities remained unchanged

Skopje, 12 March 2025    

On 11 March 2024, the National Bank’s Executive Board held a regular meeting on the monetary policy setup and discussed the latest data and information on the global and domestic economy and the latest developments on the international and domestic financial markets in the context of the monetary policy setup.

At the meeting, it was assessed that the current monetary policy setup is appropriate to the conditions in the economy, as well as to the risks, which are still present and pronounced. As a result, it was decided to leave the interest rate on CB bills at 5.35%, and the interest rates on overnight and 7-day deposits at 3.95% and 4%, respectively. The supply of CB bills at the regular auction is also unchanged and amounts to Denar 10 billion. Such a decision contributes to retain prudent monetary policy. It is still expected that the level of interest rates, together with the changes to the reserve requirement so far and the macroprudential measures undertaken, will contribute to price stability in the medium run and to the stability of the denar exchange rate against the euro.

In conditions of a stable foreign exchange market, the main emphasis in making the decision was placed on inflation performance and the risks related to the external environment and domestic factors affecting aggregate demand. In conditions of an unstable geopolitical environment and the introduction of protectionist measures, increased volatility in primary product markets is also noticeable.

The average inflation in the period January - February 2025 is 5%, with a lower comparison base than the same period of the previous year, but with further moderate growth in some price categories on a monthly basis. The monthly inflation dynamics since the beginning of the year mainly stems from food prices and the energy component, while core inflation has a neutral contribution. At the same time, the annual dynamics of core inflation is relatively stable, with a certain slowdown registered in February. With regard to inflation expectations, the European Commission's February consumer expectations surveys are dominated by expectations of a stronger price reduction in the coming period. The latest forecasts for stock market prices of primary commodities for the coming period have changed mostly upwards, which indicates risks and the need for caution.

The situation on the foreign exchange market is stable and the movements are favorable. The level of foreign reserves, at the end of February, amounted to Euro 4,861.3 million, which is adequate to maintain the stability of the domestic currency exchange rate. The change in foreign reserves since the beginning of the year is close to the expectations for the first quarter of 2025. In terms of the latest available data from the external sector, currently the trade deficit in January 2025 is slightly lower compared to the expectations for the first quarter of the October forecast round. The currency exchange market performance as of February 2025 points to more moderate net inflows from private transfers, compared to the forecasts for the first quarter. The realized deficit in the balance of payments' current account in the fourth quarter of 2024 is slightly higher than expected in the October projection, given simultaneous higher realized net financial inflows than expected, especially in direct investments..

Regarding the policy of the European Central Bank (ECB), at its last session in March, a decision was made to reduce interest rates by 0.25 percentage points, influenced by both the observations on the movement of inflation and the intensity of the monetary signals transmission in the euro area.

Economic growth accelerated slightly in the last quarter of 2024 and reached 3.2%, which is almost identical to the National Bank's forecasts. The average growth registered for the whole of 2024 is 2.8% and is higher than expected, with upward data revisions for the first half of the year. The available high-frequency data for the first quarter of 2025 are currently limited for more precise observations. Regarding the risks to the growth in the coming period, they still exist and relate primarily to developments in the external environment, but also to the speed and scope of implementation of domestic infrastructure projects.

In the monetary sector, deposits and loans recorded solid growth rates, which are still higher than the expectations for the first quarter of the year, indicating greater credit support to the economy than expected.

In general, the recent developments in key macroeconomic indicators, as well as the observations regarding their future path, impose further careful monetary policy conduct. External risks endure and become more intensive, with the domestic factors that may affect demand and price dynamics in the coming period also being closely monitored. Hence, conducting careful macroeconomic policies will be a priority in the future. The National Bank remains ready to use all necessary instruments and to take appropriate measures that will contribute to maintain the stability of the denar exchange rate against the euro and price stability in the medium term.