CNB Council: Inflation moderated, exchange rate stable

Published: 9/10/2013

At today's session the CNB Council examined recent economic and monetary indicators, as well as expected further developments.

Mild growth of economic activity in the second quarter of 2013 and stagnant developments at the beginning of the third quarter indicate that the overall fall of economic activity in 2013 and the decrease in employment may be smaller than the CNB July estimates. With regard to balance of payments developments, the current account balance continued to improve in the second quarter, and the surplus reached 0.8% of GDP, which was mostly attributed to lower profit of non-resident banks and companies. Unfavourable developments in goods trade had the opposite effect on the current account balance, since the one-off increased import of certain products in the period leading to the accession to the European Union was stronger than the temporary increase of exports of food products to the CEFTA market.

Inflationary pressures in the domestic economy continue to be contained. The year-on-year inflation rate stabilised in the third quarter at a relatively low level, amounting at 1.9% in August, after falling from an increased level during the first half of the year. However, the month-on-month rate of change of major price indicators increased during the third quarter of 2013 as a result of administrative decisions and of the increase in crude oil prices on the world market.

Expansive monetary policy continued to support high liquidity in the domestic banking system, so the average overnight interbank interest rate held steady at extremely favourable levels (0.6%), and fluctuations of the kuna/euro exchange rate remained within usual limits. Although domestic financing conditions did not change significantly relative to the beginning of the year, foreign financing costs increased. This adversely affected the one-off issue of one-and-a-half-year euro T-bills.

The CNB Council approved the appointment of Mirjana Vidan as member of the management board of Banco Popolare Croatia d.d., Zagreb, and the extension of mandate to Darko Drozdek as member of the management board of Privredna banka d.d., Zagreb, as well as to Marko Brnić as member of the management board of Slatinska Banka d.d., Slatina.