Thursday , September 29 2022

NBS: Reference interest retained at 3 percent


When making this decision, the Executive Board took into account the expected movement of inflation and its factors in the coming period, as well as the effects of the recent mitigation of monetary policy, the NBS announced.

The Central Bank states that inflationary pressures remained low in conditions of strong economic growth.

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Inflation continued to move within the target's target and in September it was 2.1 percent, and according to the November central projection, it will remain low and stable in a targeted range of 3.0 percent plus / minus 1.5 percentage points yoy to the end of the projection period , or in the next two years.

The NBS reports that the medium-term inflation trend will be primarily determined by the gradual growth of aggregate demand.

"The financial sector and the economy expect the maintenance of the price stability achieved in the forthcoming period, as evidenced by their inflation expectations anchored about the target of 3.0 percent for the year and two years in advance," the statement added.

According to the Executive Board, the effects of prior mitigation of monetary policy contribute to the acceleration of economic growth, which in the current year has grown at the highest rate in the last ten years and amounted to 4.5 percent yoy.

They note that the high contribution to economic growth comes from investments, which in the coming period will enable further growth of export of the processing industry.

Investment growth is supported by favorable terms of financing and growth of credit activity. Also, the net inflow of foreign direct investments, which more than fully covers the deficit of the current account, has a positive effect on the growth of exports and the reduction of external imbalances in the medium term.

The Executive Board considers that prudence in the conduct of monetary policy is still needed, first of all bearing in mind developments in the international environment.

The world oil price is volatile, so that its movement is uncertain in the future, with stabilization expected by the end of 2018, and by the end of 2018, and then somewhat lower by the end of 2019. To a large extent, due to higher oil prices on the world market this year, inflation is also slightly higher in the international environment, NBS said.

It is expected that by the end of the year is expected to continue to increase the reference interest rate of the Federal Reserve System of the United States and the completion of the quantitative easing program of the European Central Bank, which could reflect capital flows towards emerging countries.

In addition, the growth of protectionism in international trade has contributed to increased uncertainty in the international financial market, which could also reflect on the lesser willingness of investors to invest. Nevertheless, the Executive Committee points out that the resilience of our economy to possible negative impacts from the international environment has increased due to more favorable macroeconomic indicators and prospects for the coming period.

The Executive Board today adopted the November inflation report, which will be presented to the public on November 16th.

The next session of the Executive Board, at which a decision on the reference interest rate will be made, will take place on December 6th.

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