The Governor of the Central Bank of Bosnia and Herzegovina (CBBH), Senad Softić, is attending the Regional Summit of Governors, Ministers of Finance and Directors of Tax Authorities, which, is being held in Bečići, Montenegro, with the title “Financial and monetary stability of the region in uncertain times of prolonged geopolitical and economic crisis”.
The Governor specifically referred to the scope of monetary policy measures of the region’s Central Banks on current inflation, and the consequences of the measures of the world’s leading central banks on monetary policy in the region. As he stated, in accordance with the primary objectives, defined by law, the central banks have at their disposal various instruments for achieving the primary objectives.
The primary goal of the CBBH is a fixed exchange rate against EUR, which contributes to financial stability.
The only monetary policy instrument available, the reserve requirement, is not effective when structural factors, such as labor market frictions, the energy transition, or the low level of disposable income of the population, have a significant impact on inflation, and inflation projections.
The CBBH remains committed to harmonizing the remuneration policy on funds in bank reserve accounts with the policy of the ECB’s reference rates, the trends-wise, but not necessarily the level-wise. “We are aware that, with the arrangement of the currency board, the policies should, to the greatest extent possible, be harmonized with that of the Central Bank of the anchor currency. On the other hand, the remuneration rate is not a reference rate, and it can hardly, if at all, influence the level of interest rate in the country with a fixed exchange rate. We will continue to carefully monitor trends in the international environment and the domestic banking sector, and make decisions appropriate to the current situation and expected trends,” said Governor Softić.
Governor Softić also referred to the synergy between monetary and fiscal policy in the context of long-term and uncomfortably high inflation. As he stated, he believes that we are facing a very challenging medium-term period, in which inflation will not so quickly and easily return to the multi-year average.
In order to have a significant impact on the drop in inflation, which is still the biggest challenge for the countries of the region, optimal coordination of monetary and fiscal policy is necessary. It is necessary for each country to take appropriate measures and implement the optimal mix of these policies in order to achieve the desired effects.
In terms of this, CBBH Governor, Senad Softić, expressed his determination that the CBBH would continue to contribute to macroeconomic stability in the country with its monetary policy measures.
The Regional Summit of Governors, Ministers of Finance and Directors of Tax Authorities is held every year with the aim of developing dialogue and improving the cooperation of all financial institutions of the region, stated the CBBH.
