The National Bank explains its decision by favorable forecasts regarding the disinflationary impact of demand in the domestic market and stimulation of its further growth to support the country’s economic growth.
The decision was made to “encourage consumption and investment, balancing the national economy and the current account, as well as – to anchor inflation expectations”. The NBM explains that “the reduction of the prime rate will act through the interest rate channel and will have a downward impact on interest rates in the monetary, deposit and credit markets”.
The latest macroeconomic data and inflation dynamics in November confirm the key assumptions regarding the revival of economic activity outlined in the forecast published in the November 2025 Inflation Report. The National Bank says inflation will return to the target range this December and remain at the lower end of the target range from the first quarter of 2026 through the end of the forecast period.
Annual inflation stood at 6.99% in November, remaining in line with the previous month and exceeding the upper limit of the deviation range of ±1.5 percentage points from the target of 5.0%.
At the same time, the risks to this forecast remain, and quite serious. First of all, they are related to prices for energy resources and raw materials.
Among the main pro-inflationary threats, the central bank names the risks “associated with the method of tariff adjustment, the method of providing compensation to households for energy resources in the cold period of the year, the method of reflection of compensations mentioned by the National Statistical Bureau in the calculation of CPI, the tense situation in the region and the risks of its escalation”.
Inflation targeting in the future will be conditioned by other risks: “with uncertainty regarding agricultural production in the coming years, migration of population, more moderate regional demand as a result of mutual sanctions of the countries of the region, as well as labor shortage in the national economy and negative demographic trends”.
