At its meeting today, chaired by Deputy Governor Dr. Boris Vujčić, the CNB council decided not to modify the monetary policy projection for 2005, the latest economic and monetary developments being in line with expectations.

CPI inflation and core inflation stood at 2.7% and 2.3% respectively in 2004. Although the rates were higher than in 2003, and despite a strong impact of last year's rise in oil prices on the price level, Croatia has remained a low inflation country.

With the kuna exchange rate kept within a common band, the central bank has intervened in the foreign exchange market only to prevent excessive fluctuations. Today the CNB purchased EUR 8.5m, responding to mounting appreciation pressures, which followed the depreciation trend in late December observed after central bank purchase of EUR 99.5m in early December.

The increase in foreign currency supply was also due to stronger foreign borrowing by banks seen in November and December. This also drove up the growth rate of domestic bank placements, which stood at about 14.2% at the year-end (about the same in 2003, this rate declined to 12% at mid-2004).

The most significant development in the balance of payments was the continued positive trend in foreign trade: the eleven-month exports (without ships and refined petroleum products) rose by 14.4% in 2004, at the constant exchange rate, and total exports by 8.8%.