Distinguished ladies and gentlemen, I dedicated most of my last year’s speech arguing that the stable Denar exchange rate is still the best solution for the Macedonian economy. In the public debate concerning this issue last year, on many occasions, I presented additional arguments that underpin my view. On this occasion I will discuss the two theses recently presented by the advocates of floating Denar exchange rate. The first thesis is that the floating exchange rate will ensure more relaxed monetary policy, and accordingly, higher economic growth. The second thesis is that the Denar exchange rate is not realistic, i.e. it is overrated. Yet, so far, I still have not heard any explanation of how would the floating exchange rate relax the monetary policy, nor arguments supporting the view that the Denar is overrated. Considering the first thesis, note that the exchange rate regime does not determine whether the monetary policy will be restrictive or relaxed. You could have floating rate and restrictive monetary policy, or fixed exchange rate and relaxed monetary policy. What is important for the monetary policy is whether there are imbalances in the economy or not. Just because of the absence of imbalances in the Macedonian economy, as I elaborated at the beginning, we can afford relaxed monetary policy. Conversely, due to the nature of our economy, the floating exchange rate would fuel uncertainty and create imbalances and high inflation, the alleviation of which would require extremely restrictive monetary policy.
To summarize, we face low level of risk in the external and the banking sector, low to moderate level of risk in the public sector, the Denar exchange rate is stable, the inflation is lower than in the euro area, and the economic activity decelerates. What would be more suitable in a situation like this than to send signal that there are conditions for enhanced banking activity without jeopardizing the stability? This is exactly the goal of our measures. It is not our intention just to conclude that the credit growth does not develop as expected, and to revise the rate downward all over again. We consider that the credit growth could range around 7–8% without jeopardizing price and financial stability, and we clearly signalize this. BIS central bankers’ speeches  1  The question is whether the banks will follow our signal? The promptness and intensity of banks’ response depend on the power of monetary policy transmission. The recent researches conducted by my coworkers show that the power of monetary policy transmission in our banking system is limited. This was yet another reason to redesign the monetary policy instruments. We hope that the new monetary framework will improve the monetary transmission. Otherwise, we will keep on advancing the monetary instruments setup. CB bills are the National Bank basic instrument used to absorb excess liquidity by banks. CB bills are not investment vehicles. In many countries there are no CB bills.