Skopje, 21 October 2022 (MIA) – Central banks and the policies they lead must be committed to medium-term price stability. In conditions of high inflation and inflationary expectations, the monetary authorities do not have much space to commit themselves to other goals beyond their basic mandate, the Governor of the National Bank, Anita Angelovska Bezhoska, points out in an op-ed for Belgrade-based weekly NIN. As the National Bank informs, Angelovska Bezhoska points out that due to the great trade openness of the countries of the Western Balkans, global price movements have a strong impact on inflation in the region, which reached an average of 13.5 percent and although the production gap in many economies in the region is still negative, inflation expectations are influenced by the long-term increase in input costs, food prices and signs of transmission effects on other prices. “Central banks will have to manage inflation expectations in increasingly uncertain economic conditions, supplemented by geopolitical factors. The longer there is high inflation, the greater the risk in terms of inflation expectations, the credibility of policies and the opening of the wage and price spiral. Therefore, it is more than certain that we are leaving the environment of low interest rates globally. The big central banks that dictate the conditions for global financing, such as the Fed and the ECB, have already started tightening the monetary policy, and other central banks are following their example,” writes Governor Angelovska Bezhoska. Some of the central banks in the region, according to her, tighten the monetary policy quite aggressively, while another part takes more moderate steps. “This indicates that aside from global factors, the specifics of national economies condition the setting of monetary policy. The main challenge is to avoid overly pro-cyclical monetary policy and excessive costs to the real economy, thus increasing risks to financial stability. In this uncertainty, one of the most important pillars of central banks' policy is timely and effective communication with the public,” Angelovska Bezoska believes. The Governor further points out that in this macroeconomic context it is very important to maintain attention to the implementation of structural reforms, which are key to raising the potential for growth and strengthening the resilience of the economy. She also states that many of the challenges that the countries of the region are facing today are the result of the slow implementation of structural reforms in the past. dk/sk/