Regular meeting of the Monetary Policy Executive Board

The annual inflation rate remained moderate, with evident effects of the growth of global energy prices on the domestic inflation in August. The Executive Board assessed that more time is needed to confirm the sustainability of the decelerating inflation trend, especially given the high uncertainty in the external environment. Further escalation of the military activities in the Middle east, as well as the Russia-Ukraine war have triggered another strong growth in oil prices and other energy supplies, as well as disruption in supply chains, with possible spillover effects on the foreign exchange market and domestic prices in the coming period. In addition, domestic factors influencing demand remain and create risks to the future inflation pace. In such conditions, it was assessed that the current monetary policy stance is appropriate, with the existing uncertainty pointing to the need for further prudent approach.

The maintenance of the policy rate, together with the measures taken so far in reserve requirement and macroprudential policy will contribute to maintaining the stability of the exchange rate of the denar against the euro, long-term stabilization of the inflation and enhanced inflation expectations, also affecting the credit standards in economy. At the last meeting in September, the European Central Bank increased the policy rates by 0.25 percentage points, amid further inflation pressures related to the Middle East conflict, with inflation estimates significantly above the target level for a longer period.

Regarding the latest data on the main macroeconomic indicators, **at the end of August, foreign reserves amounted to Euro 5,101 million and remain in the safe zone in accordance with the adequacy indicators.**As of early May onwards, the foreign exchange market is stable, with National Bank purchasing foreign currency in the period July-August. However, given the larger amount of sales in the beginning of the year, the National Bank has, cumulatively, intervened in the foreign exchange market by selling foreign currency in the past period of 2026. The change in the foreign reserves is so far better than expected in the April forecast.

In August 2026, the annual inflation rate was 2.6% (2.3% in July). The growth of global energy prices reflected the domestic prices, through accelerated growth of the energy component of inflation. The inflation was slightly lower compared to the expectations in the April forecasts, amid smaller growth in food prices than expected. However, inflationary pressured remain, amid significant volatility of import prices, thus creating risks in terms of inflation trajectory in the coming period. The latest revisions to inflation-relevant import prices are upward, amid pronounced uncertainty of the future dynamics of world commodity prices.

Domestic economy remains resilient despite the unfavorable and uncertain external environment. In the second quarter of 2026, the real annual GDP growth accelerated to 4.3%, which is higher compared to the April forecast. The growth is partly due to the gross investments, mainly as a result of the construction activities related to the major infrastructure projects. In the monetary sector, the credit support remains stronger compared to the forecasts, being a factor that requires cautious monitoring, while the deposit base growth does not deviate significantly from the forecast path.

**The National Bank remains committed to the maintenance of the stability of the exchange rate of the denar against the euro, as a basic prerequisite for providing medium-term price stability.**For that purpose, the National Bank will continue to carefully monitor the domestic and international economic and financial developments, will assess their effects on the foreign exchange market and inflation and is ready to use all the available instruments for preserving macroeconomic and financial stability.