Central Bank's Governor: Inflationary Pressure in Bulgaria Is Stronger than the Eurozone Average; Inflation Is Already at 6%

Inflationary pressure in Bulgaria is stronger than the eurozone average. Inflation has already reached 6%. This was stated by Bulgarian National Bank Governor Dimitar Radev at the OMFIF – the Official Monetary and Financial Institutions Forum – being held in Sofia on November 3.

“Joining the eurozone does not eliminate differences between national economies, nor the need for sound domestic policies. Inflation dynamics are a telling example. In September, annual inflation in Bulgaria stood at 5.6%, as measured by the Harmonised Index of Consumer Prices, compared with an average of 3.8% for the eurozone. Preliminary data from the National Statistical Institute, which I assume will be announced today, show a further increase in annual inflation in October to 6%. These figures indicate that inflationary pressure in Bulgaria remains stronger than the eurozone average. The single monetary policy provides the framework for price stability in the eurozone, but national economic conditions continue to matter, including domestic demand, credit growth and financing conditions,” Bulgarian National Bank Governor Dimitar Radev said at the forum.

Radev stressed that national central banks and supervisory authorities have specific responsibilities.

“They must monitor not only the state of the banking system, but also the risks arising from changes in the economic, legal and regulatory environment. When such changes may affect banks’ resilience, lending or the cost of financing, an independent central bank has a responsibility to assess the consequences and present them clearly to the public. Bulgaria’s banking sector remains well-capitalised and liquid, while lending continues to grow at a significant pace, particularly in the area of housing loans. This calls for a preventive approach to supervision and macroprudential policy. Strong banking-sector indicators are no reason to ease requirements,” the BNB Governor said at the forum.

The BNB Governor recalled the European Central Bank’s decisions in connection with efforts to curb inflation:

“On 29 October, the Governing Council of the European Central Bank decided to leave its three key interest rates unchanged, following the increases in September. I believe this was the right decision. It gives us time to assess the impact of the energy shock and tighter financial conditions. However, the inflation outlook has deteriorated compared with September, and this must be reflected in our assessment of the appropriate monetary policy stance. In this context, the October pause was a decision to assess the available data, not a conclusion that monetary policy tightening was over,” Dimitar Radev said, adding that if incoming data confirm that inflationary pressure is becoming more persistent, a further increase in interest rates may be necessary.

Radev also commented:

“Annual inflation in the eurozone reached 3.8% in September. A significant part of the increase was due to energy prices, which rose more than anticipated in the European Central Bank’s September forecast. This means inflation is higher than previously expected and there is a risk of a more prolonged deviation above our 2% target. The key question is to what extent this pressure will be passed on to other prices, wages and inflation expectations. So far, core inflation has remained relatively stable, and we are not seeing widespread pass-through of the energy shock to wages. This is encouraging, but it does not eliminate the risks.”

The BNB Governor concluded that forecasts for overall inflation in 2027 had been revised upwards to 2.6%, while the projection for core inflation had risen to 2.5%. Radev said, however, that the good news was that long-term inflation expectations remained anchored at 2%.

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