North Macedonia’s central bank said on July 28 that it left its key interest rate unchanged at 4.25% (chart), opting to maintain a cautious monetary policy stance despite a continued slowdown in inflation, citing persistent external risks linked to geopolitical tensions and elevated energy prices.

Annual inflation slowed to 3.4% in June, below the central bank's April projection, driven by more moderate food price growth, favourable seasonal and base effects, and easing core inflation related to volatile air travel prices.

However, the central bank warned that inflation remains relatively high, while import prices continue to be elevated and volatile due to geopolitical uncertainty.

It highlighted renewed military escalation in the Middle East and the ongoing war in Ukraine as key risks that have pushed up energy and commodity prices and disrupted global supply chains.

Domestic demand pressures also continue to pose upside risks to inflation, the central bank said.

The decision follows a similar move by the European Central Bank, which also left its key interest rates unchanged at its latest policy meeting, citing persistent uncertainty and the incomplete pass-through of energy price shocks to euro area inflation.

The National Bank said developments on the foreign exchange market have remained stable since the beginning of May, although demand for foreign currency from the corporate sector remains elevated, partly due to higher energy costs.

Foreign exchange reserves stood at €4.94bn at the end of June, remaining within the central bank's adequacy benchmarks. The National Bank said it had made only limited interventions in the foreign exchange market during the period, involving both purchases and sales of foreign currency.

Despite the challenging external environment, the domestic economy continues to show resilience. Real GDP expanded by 3.1% year on year in the first quarter of 2026, while high-frequency indicators suggest economic growth may have accelerated further in the second quarter.