The National Bank decided to maintain its current monetary policy stance, keeping the interest rate on treasury bills at 5.35% and the interest rates on overnight and 7-day deposits at 3.95% and 4%, respectively on April 17, 2025. This decision reflects a cautious approach to monetary policy in light of pronounced adverse risks, particularly from the external environment.
The offer of treasury bills at the regular auction will remain unchanged at 10 billion denars. This measure, along with the existing interest rates, previous changes in the reserve requirement, and macroprudential measures, aims to contribute to price stability in the medium term and maintain the stability of the denar’s exchange rate against the euro.
The central bank’s announcement emphasizes that inflation performance remains a key concern, especially given the increasing unpredictability and risks in the external environment. Unstable geopolitical conditions and changes in global customs policies are worsening prospects for trade and economic activity while increasing volatility in both primary product and capital markets. Domestic factors affecting aggregate demand are also being closely monitored.
The annual inflation rate in March 2025 slowed significantly to 2.7%, lower than expected. This decrease is partially attributed to short-term measures limiting price growth. However, the average inflation for the first quarter was slightly higher than the October projection. The slowdown in March was mainly due to weaker growth in food prices, the exhaustion of the lower comparison base effect, and the impact of the temporary price control measures, which are set to expire at the end of April. The growth of the core inflation component is also slowing, and the fall in energy prices is accelerating. Consumer surveys indicate expectations of a more moderate reduction in prices in the near future, while projections for stock market prices of primary products have mostly increased, indicating heightened risks and the need for continued caution.
The foreign exchange market remains stable, with foreign exchange reserves at EUR 4,788.1 million at the end of March. This level is considered adequate for maintaining the stability of the domestic currency’s exchange rate. Foreign exchange reserve performance is close to expectations for the first quarter, and interventions in the foreign exchange market have been moderately positive since the start of the year. Data from the external sector show more moderate net inflows from private transfers compared to projections, while the trade deficit for the first two months of the year is moderately higher than expected.
Economic growth in the last quarter of 2024 accelerated slightly to 3.2%, almost matching the National Bank’s projection of 3.1%. High-frequency data for the first quarter of 2025 indicate further, but more moderate, growth, with weaker movements in trade, construction, and tourism, and stronger movements in hospitality and industry. Downward risks to growth in the coming period primarily stem from the external environment, while domestic risks are linked to the pace and scope of domestic infrastructure projects.
The monetary sector is performing better than expected, indicating stronger credit support for the economy. Data for March show solid growth rates for both deposits and loans, exceeding expectations for the first quarter of the year.
In summary, the National Bank acknowledges the generally favorable performance of key macroeconomic indicators but emphasizes the need for careful management of monetary policy due to external risks and domestic factors that may affect demand and price dynamics. The central bank remains prepared to use all necessary instruments and take appropriate measures to maintain the stability of the denar’s exchange rate against the euro and ensure price stability in the medium term.