Skopje, 18 December 2024 

On 17 December 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, as well as the latest developments on the international and domestic financial markets in the context of the monetary policy setup.

The Committee assessed that the latest conditions in the economy enable further gradual normalization of the monetary policy setup. As a result, the Committee decided to reduce the interest rate on CB bills by 0.25 percentage points, to the level of 5.55%. At the meeting, the Board also decided to reduce the deposit facility interest rates, by 0.25 percentage points, whereby the interest rates on overnight and 7-day deposit facilities will equal 3.95% and 4%, respectively. The supply of CB bills at the regular auction remains unchanged and amounts to Denar 10 billion.

This change in the interest rates means that the vigilant approach in the monetary policy conduct remains, which is conditioned by enduring external risks, as well as domestic factors that affect the aggregate demand. The level of interest rates, together with the changes in reserve requirement and macro prudential measures taken, are expected to contribute towards price stability in the medium run and stability of the denar exchange rate against euro.

The monetary policy decision is based on the inflation forecast, which moves within the expectations, as well as on the continuous favorable developments on the foreign exchange market. The annual inflation rate accelerated in November as expected and equaled 4.3% (3.5% in October), because of the food prices. This is largely explained by the lower comparison base compared to the same period last year, due to the measures taken then in order to limit the price growth temporarily. At the same time, core inflation is slowing down on an annual basis, registering as well further price drop in the energy component. The effects of the comparison base will have a prolonged impact on food prices, i.e. by the end of the year, the annual inflation rate is expected to remain close to last month's level. Despite such movements, on average for the entire 2024, the inflation is expected to be 3.5%, i.e. within the projected rate, according to the October forecasting round The EC's surveys of consumers' expectations show that the expectations for price reduction in the next period prevail. Regarding the stock market prices of primary products, according to the latest forecasts they have been revised downwards, in line with reduced global demand.

The foreign exchange market is stable and the movements are favorable. The level of foreign reserves at the end of November equaled Euro 4,920 million, which is an appropriate level for maintaining the stability of the domestic currency exchange rate. In line with the favorable developments on the foreign exchange market, the National Bank has intervened by purchasing foreign currency since the beginning of the year, which contributed to improved performance in the foreign reserves than expected. Regarding the latest available external sector data, the trade deficit in October 2024 is currently lower compared to the expectations for the fourth quarter in the October forecasting round. The performance on the currency exchange market as of the end of November matches the projected net inflows based on private transfers. In the third quarter of 2024, the balance of payments’ current account surplus is almost at the level of the one in the October forecast, given registered net financial outflows as expected.

Regarding the European Central Bank (ECB) policy, as a factor that the National Bank has taken into account, at the latest meeting in December, for the fourth time this year, decision on reducing the interest rate by 0.25 percentage points was adopted.

The economic growth in the third quarter of 2024 accelerated moderately and reached 3%, which is close to the National Bank forecasts. The growth registered in the first three quarters of the year equaled 2.6%, which slightly exceeded the expectations, amid upward data revisions for the first half of the year. Regarding the risks to the growth in the next period, they are still present and are primarily related to the developments in the external environment, as well as to both intensity and dynamics of realization of domestic infrastructure projects.

In the monetary sector, the deposits and credits register solid growth rates, with the developments so far being better than expected for the last quarter of the year.

Generally, the latest developments in the key macroeconomic indicators, as well as the perceptions in relation to their future path, created a room for further normalization of the monetary policy. The external environment risks are still present, with the risks arising from domestic factors being vigilantly monitored, since they can affect the demand and the prices in the following period. Therefore, the conduct of prudent macroeconomic policies will remain priority in the future, as well. The National Bank remains prepared to use all the necessary instruments and to take appropriate measures that will contribute to maintenance of the stability of the exchange rate and the medium-term price stability.