Monetary conditions will become less stimulative in 2024, but the National Bank cannot explain what degree of their strictness corresponds to ensuring macroeconomic stability.
Monetary conditions remained loose in Q4-2023 mainly due to low interest rates in the credit and deposit market. The foreign exchange rate stopped restraining inflation, which accelerated at the end of the year amid an overheated economy and a tense labor market. The National Bank took steps to narrow monetary incentives at the end of 2023; in 2024 the stimulative effects of market interest rates are expected to decline, while preferential access conditions for the public sector will limit policy effectiveness.
The National Bank took actions aimed at narrowing monetary incentives for private businesses and households at the end of 2023 in response to inflation risks and the high social and political costs of their implementation for the authorities. In 2024, the stimulative effects of market interest rates on economic activity are expected to decline. At the same time, the public sector will retain its preferential access-to-finance conditions, which will limit monetary policy effectiveness.