Bankers on the Challenges of Monetary Policy in Central and Eastern Europe

The Croatian National Bank has hosted the regular annual meeting of the Working Group of the Bank for International Settlements (BIS) on monetary policy in Central and Eastern Europe for the past three days, as announced by the HNB.

The meeting, which took place from Sunday, February 18 to today, February 20, gathered representatives from the BIS, the European Central Bank, and representatives from the central banks of about 20 countries, and was dedicated to issues of monetary, exchange rate, and fiscal policy, as well as developments in the financial sector and labor market. Participants at the meeting, as reported by the HNB, expressed their views on the sustainability of economic growth in Central and Eastern Europe and expectations regarding price stability in the region in 2007, discussed risks arising from foreign borrowing, and the impact of capital inflows on local financial markets and exchange rates.

The effectiveness of monetary policies was assessed in light of the challenges they face, as well as the measures that central banks in the region are taking to respond to appreciation pressures and the role of interest rates as one of the channels of monetary transmission. There was also discussion about the growing deficits in current accounts of balance of payments and the causes of their growth, as well as the risks arising from rising real estate prices. The effectiveness of prudential measures taken by banking supervisors to maintain the stability of financial institutions and slow down credit growth was also considered.

Discussions also covered developments in local labor markets: unemployment, wage growth, and productivity, as well as the effects of worker migration on labor markets in the region’s countries. Meeting participants had the opportunity to present their views on fiscal policy in their home countries and its alignment with the Maastricht criteria, as well as the impact of these measures on monetary policy, according to the HNB. The meeting was organized by the BIS and the Croatian central bank, and representatives from the BIS, the European Central Bank, and the central banks of Albania, Austria, Bosnia and Herzegovina, Montenegro, the Czech Republic, Estonia, Finland, Latvia, Lithuania, Hungary, North Macedonia, the Netherlands, Germany, Poland, Romania, Slovenia, Serbia, Turkey, and Croatia participated in its work. (H)