The MK Central Bank’s decision to hold the interest rate at 5.35% marks the seventh consecutive meeting with no change since February 2025. This stability follows a period of tightening from 5.80% in October 2024 to the current level. The move reflects a cautious stance amid moderate inflation pressures and steady economic growth.

Drivers this month

• Inflation remains near the 3.20% YoY mark, slightly above the 3% target.
• GDP growth slowed to 2.10% YoY in Q3 2025, down from 2.50% in Q2.
• Unemployment steady at 6.40%, signaling labor market resilience.

Policy pulse

The unchanged rate aligns with the Central Bank’s inflation target band of 2.50%–3.50%. The bank signals readiness to adjust if inflation deviates significantly or growth falters.

Market lens

Following the announcement, the MKD currency appreciated 0.30% against the USD within the first hour, while 2-year government bond yields remained stable at 5.40%. Breakeven inflation rates held steady near 3.10%, indicating market confidence in the bank’s inflation management.

Core macroeconomic indicators provide essential context for the interest rate decision. Inflation, GDP growth, labor market conditions, and fiscal balances all influence monetary policy calibration.

Inflation trends

Consumer Price Index (CPI) inflation stood at 3.20% YoY in October 2025, slightly above the 3% target but below the 3.50% upper threshold. This marks a moderation from 3.80% in mid-2024, reflecting easing commodity prices and stable domestic demand.

Economic growth

GDP expanded by 2.10% YoY in Q3 2025, down from 2.50% in Q2 and 3.00% in Q3 2024. The slowdown is attributed to weaker export demand amid global uncertainties and cautious private investment.

Labor market and fiscal policy

Unemployment held steady at 6.40%, consistent with the 6.30% average over the past year. Government budget deficits narrowed to 2.80% of GDP in FY2025, down from 3.50% in FY2024, reflecting improved tax collection and restrained spending.

Drivers this month

• Stable inflation near target reduces pressure for rate hikes.
• Slower GDP growth suggests limited room for easing.
• Fiscal consolidation supports monetary policy credibility.

Policy pulse

The Central Bank’s neutral stance reflects a data-dependent approach, maintaining rates to monitor inflation trajectory and external risks.

Market lens

Immediate reaction: MKD/USD strengthened 0.30%, while 2-year yields held at 5.40%, signaling market approval of the steady policy.

Looking ahead, the Central Bank faces a complex environment shaped by domestic and external factors. We outline three scenarios for MK’s monetary policy trajectory over the next 12 months.

Bullish scenario (30% probability)

• Inflation falls below 3%, allowing gradual rate cuts to 5.00% by mid-2026.
• GDP growth rebounds above 3%, supported by stronger exports and investment.
• Fiscal discipline continues, reinforcing monetary policy effectiveness.

Base scenario (50% probability)

• Inflation remains near 3.20%, with rates held steady at 5.35% through 2026.
• GDP growth stabilizes around 2%, with moderate external headwinds.
• Fiscal policy remains neutral, avoiding shocks to demand.

Bearish scenario (20% probability)

• Inflation spikes above 4% due to external commodity shocks or currency weakness.
• Central Bank forced to hike rates to 5.75% or higher.
• GDP growth slows below 1%, risking stagflation pressures.

The MK Central Bank’s decision to maintain the interest rate at 5.35% reflects a balanced approach amid moderate inflation and slowing growth. The steady policy stance supports financial stability while allowing flexibility to respond to evolving risks. Market reactions suggest confidence in the bank’s guidance, though external shocks and geopolitical tensions remain key downside risks. Fiscal consolidation complements monetary policy, enhancing credibility. Investors and policymakers should monitor inflation trends and global developments closely to anticipate potential shifts.

Key Markets Likely to React to Interest Rate Decision

The MK interest rate decision influences several tradable assets sensitive to monetary policy and economic conditions. The following symbols historically track MK’s rate moves and macro shifts:

• ABCD – A leading MK banking sector stock, sensitive to interest margin changes.
• MKDMKD – The domestic currency pair, directly impacted by rate adjustments.
• BTCUSD – Crypto markets often react to macro liquidity shifts driven by interest rates.
• EFGH – An industrial stock with export exposure, sensitive to currency and rate changes.
• EURMKD – Euro to MKD pair, reflecting cross-border capital flows and policy divergence.

Frequently Asked Questions

What is the significance of MK’s interest rate decision?

The interest rate guides borrowing costs, inflation control, and economic growth, influencing financial markets and consumer behavior.

How does the current rate compare historically?

At 5.35%, the rate is below the 5.80% peak in late 2024 but above the 4.90% average of 2023, reflecting a moderate tightening cycle.

What risks could alter the Central Bank’s policy?

External shocks like commodity price spikes, geopolitical tensions, or domestic fiscal slippages could prompt rate adjustments.

Key takeaway: MK’s Central Bank maintains a steady interest rate amid balanced inflation and growth signals, poised to adapt as economic conditions evolve.