North Macedonia cuts rate 3rd time and adds liquidity

      North Macedonia's central bank lowered its policy rate for the third time this year to support the economy by lowering the cost of financing and trimmed the amount of Treasury bills that will be auctioned to provide additional liquidity in the banking system that can be used to increase lending activity and mitigate the effects of the negative shock from the coronavirus.
     The National Bank of the Republic of North Macedonia cut its policy rate by another 25 basis points to 1.50 percent and has now cut it by 75 points this year following cuts in January and then at an emergency meeting on March 16.
     The bank's operational monetary policy committee trimmed the amount of treasury bills, which together with the reduced offer in April, will release a total of 15 billion denars, and expanded the scope of instruments through which it can provide liquidity to the banking system.
      The central bank will now accept domestic government bonds with the longest maturities (15 and 30 years) as well as Eurobonds when purchasing securities as part of monetary operations.
      Although external and domestic risks to the economy continue, the central bank said moderate inflation and a stabilization of expectations and recent confidence, evidenced by the foreign exchange market, and deposits in the banking system, provided room for further monetary easing.
      Recent data for the first quarter of this year show continued but slower economic growth and average inflation in the first four months of the year was 0.4 percent, with inflation expectations around zero percent for this year.
      Foreign exchange reserves remain in what the central bank said was "a safe zone," with net inflows from private transfers in the second half of April slightly lower than expected.
     The central bank's intermediary policy objective since 1995 has been to target the denar's exchange rate due to its significance in a small, open economy, the need for a nominal anchor to maintain credibility, the high level of use of the euro and the transparency of the exchange rate policy.
     The Macedonian denar rose in response to the rate cut to trade at 61.5 to the euro, but is unchanged on the year.

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Macedonia holds rate, sees positive FX impact from ECB

    Macedonia's central bank held its benchmark interest rate steady at 3.25 percent, saying the past monetary policy measures were sufficient to support the domestic economy which continues to recover steadily.
    The National Bank of the Republic of Macedonia (NBRM), which cut its rate by 25 basis points in 2013, said an exit from the "zone of accommodative monetary policy" would depend on changes in the external position of the economy and the effect on foreign reserves.
    The European Central Bank's (ECB) interest rate reduction "mitigates part of the potential risks for the external position of the domestic economy," the central bank said, adding this rate change has increased the spread between Macedonia's domestic currency and the euro, "thus raising the attractiveness of the domestic currency."
    A meeting on June 10 by the bank's Operational Monetary Policy Committee found continuing favorable trends in economic activity in the first quarter and economic recovery is estimated to proceed as expected, with growth still not strong enough to cause major imbalances in the economy, such as inflationary pressures or a significant deterioration in the external position.

Macedonia holds rate, sees risk of lower inflation

    Macedonia's central bank maintained its monetary policy stance, including the main interest rate at 3.25 percent, but said there were downward risks to inflation given that inflationary pressures have been lower than expected in recent months and import prices have the potential to decline further.
    The National Bank of the Republic of Macedonia (NMRM), which cut its rate by 25 basis points in 2013, also said indicators for the last quarter showed that the country's economy would continue to grow, probably at a rate similar to the third quarter.
    This view is largely based on favorable developments in construction and industrial activity.
    Macedonia's Gross Domestic Product expanded by an annual 3.3 percent in the third quarter, down from 3.5 percent in the second quarter.
    In its latest quarterly report from October, the central bank raised its 2013 growth forecast to 3.3 percent from an April forecast of 2.2 percent, and its 2014 growth forecast to 3.7 percent from 3.0 percent due to better exports and higher investments. In 2015 growth is forecast to reach 4.4 percent with credit growth rising to 5 percent in 2013, about 6 percent in 2014 and 8 percent in 2015.