Bulgarian National Bank (BNB) Governor and member of the European Central Bank (ECB) Executive Board Dimitar Radev said that neither a further interest rate rise nor a pause should be seen as the next step for the European Central Bank (ECB). Radev was speaking at a video conference on MNI Connect, a platform for briefings and discussions between leading central bankers and financial experts, BNB reported on Thursday.
Radev said: “The September decision does not predetermine the next one. Neither another increase nor a pause should be treated as the default. Both depend on the evidence. Market-rate assumptions used in the projections provide a consistent basis for the forecast; they are not commitments by the Governing Council.”
On September 10, the Governing Council raised the three key ECB interest rates by 25 basis points. Radev stated that this decision reflected an assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary-policy transmission. “Those same three elements will guide future decisions,” he concluded.
Radev said that monetary policy works with lags, which is why central banks need to give previous decisions time to affect the economy. He added: “But patience does not mean passivity. We should remain ready to act if the evidence requires it.”
The head of BNB stated if energy-price pressures fade, broader inflation remains contained and transmission proves stronger than expected, there would be more room to allow the effects of earlier decisions to work through the economy. If the shock persists, price pressures broaden, survey expectations continue to move upward, or transmission proves weaker than expected, the case for further action would become stronger.
Radev said: “Growth has been somewhat more resilient than expected. Domestic demand has held up, labour markets remain relatively strong, and higher public investment, together with selected areas of private investment, is supporting activity. But resilience should not be confused with immunity. Financial conditions have tightened, borrowing costs are higher, and credit developments remain uneven. The external environment is exceptionally uncertain. The balance of risks therefore remains differentiated – risks to inflation are tilted to the upside, while risks to growth are tilted to the downside. This matters because the strength of demand affects the transmission of an energy shock. A resilient economy may absorb the shock more successfully. It may also make it easier for firms to pass higher costs through to prices. We therefore need to assess growth and inflation together.”
The head of BNB stated that support during a severe external shock may be justified, but it should be temporary and targeted, as broad-based measures can add to demand, delay adjustment and consume fiscal space. “Credible public finances therefore remain an important part of macroeconomic resilience,” he added.
Radev reported: “[Bulgaria’s] experience as a small, open and converging economy illustrates why a common monetary policy must be complemented by sound national policies. External shocks can pass through quickly, while inflation and credit dynamics can differ from the euro-area average. For Bulgaria, this means not only managing cyclical risks, but also continuing the transition towards a growth model based more firmly on productivity, investment and higher value added, while strengthening the fiscal position. Sustainable convergence requires credible public finances, rebuilt buffers and sufficient room to respond to future shocks. Effective supervision and appropriately calibrated macroprudential measures are also essential complements to monetary union. The best protection against repeated shocks is not permanent compensation, but stronger institutions, prudent buffers and a greater capacity to adapt.”
Central Bank Governor: New Interest Rate Rise Cannot Be European Central Bank’s Next Step 2026 THE NEWS FROM BULGARIA – NEWS AGENCY 2009-2025 2026-09-24 16:00:19
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