North Macedonia's central bank, NBRM, said on August 3 it raised its policy rate by 0.15 percentage points (pp), to 6.15% (chart), in line with the decision of the European Central Bank, which also opted to raise the interest rate.

The process of monetary tightening commenced at the end of 2021, initially through interventions in the foreign exchange market. Subsequently, from April of the following year, it was further implemented by raising the interest rate on treasury bills and other monetary instruments.

The central bank of North Macedonia also decided to increase the interest rate on overnight deposits by 0.15 pp to 4.05% and the rate on seven-day deposits to 4.1%.

The NBRM also said that these measures are supplemented by changes in the mandatory reserve instrument, aimed at promoting denarization where positive trends are evident.

To bolster the denarisation process in banks' balance sheets, it was decided to raise the rate of mandatory reserve for foreign exchange liabilities from 19% to 20%. Additionally, the rate of mandatory reserve for liabilities in denars with a foreign exchange clause has been increased from 50% to 100%.

Moreover, the percentage of maintaining the mandatory reserve from liabilities in foreign currency settled in euros has been raised from 77% to 80%.

Meanwhile, the finance ministry sold over MKD8.977bn (€146mn) of 48-day central bank bills on August 3 with an increased interest rate of 6.15%, missing the target offer of MKD10bn.

The next auction will be held on September 20.