PRICE STABILITY TARGET OF THE CENTRAL BANK AND ITS INTEREST POLICY CASE STUDY OF NORTH MACEDONIA
PRICE STABILITY TARGET OF THE CENTRAL BANK AND ITS INTEREST POLICY CASE STUDY OF NORTH MACEDONIA

Summary/Abstract: Continuous increase in the general level of prices or excessive volatility are among the most important problems of the economy. If the price stability is considered as the main objective in monetary policy, first of all, the factors causing instability in the general level of prices should be identified and then appropriate monetary policy tools should be used. The main objective of the Central Bank of North Macedonia, set by law, is to ensure the price stability. To achieve the final target, the Central Bank sets the intermediate target of monetary policy. The Central Bank since January 2002 has been implementing a fixed exchange rate strategy against the Euro. Therefore, ensuring the stability of the exchange rate is one of the intermediate objectives of monetary policy. While the effects of the COVID 19 pandemic were overcome in 2021, the global food crisis that broke out in 2022 affected the whole world, while the North Macedonian Economy experienced high price increases that have not been seen for many years. As a matter of fact, the country reached double-digit inflation in 2022. Inflationary pressures in the economy are mainly caused by the prices of products in which food and energy have a high share in the consumption basket. Due to the increase in prices, the Central Bank of North Macedonia has gradually narrowed its monetary policy since 2022. As a contractionary monetary policy instrument, additional measures were taken in compulsory reserves, particularly in interest rates. In order to ensure the price stability, the monetary policies implemented should be supported by fiscal policies. The government's taking parallel steps with the central bank in this regard will reduce the pressure on prices

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