Prices in Bulgaria are rising faster than the eurozone average. Annual inflation in October is 6%, according to preliminary data from the National Statistical Institute (NSI). That means goods and services cost 6% more on average than a year ago.
Bulgarian National Bank (BNB) governor Dimitar Radev said this at the Official Monetary and Financial Institutions Forum (OMFIF) in Sofia. He said the NSI figures for October are due on the day of the forum.
The September data also shows the gap. Eurozone inflation averaged 3.8%, while in Bulgaria it was 5.6% on the harmonised index of consumer prices (HICP).
Radev did not rule out another interest rate rise by the European Central Bank (ECB) if new data show prices still climbing stubbornly. "The October pause was a decision to assess the available data, not a conclusion that the tightening of monetary policy is over," he said.
At its meeting on 29 October, the ECB Governing Council left its three key interest rates unchanged after raising them in September. Radev called the decision right and stressed that it was "our decision", because he is also a member of the council. The pause gives time to see the effect of the energy shock and tighter financial conditions.
The outlook for inflation is worse than in September, and Radev said this should be reflected in the assessment of monetary policy. Much of the September rise in eurozone prices came from energy, which rose by more than the ECB had forecast.
That means higher inflation than expected, and a risk that prices stay above the ECB's 2% target for longer. The bank has already raised its forecast for headline inflation in 2027 to 2.6%. For core inflation, which leaves out the most volatile prices such as energy, it now expects 2.5%.
The key question is how far higher energy prices will spread: to other goods and services, to wages and to what people expect prices to do. For now, core inflation is fairly stable and the energy shock has not fed widely into wages. Radev said this is encouraging, but the risks remain. He named one piece of good news: long-term inflation expectations are anchored at 2%.
The governor said the eurozone does not erase the differences between national economies or remove the need for sound domestic policies, and inflation is an example. The common monetary policy sets a framework for stable prices, but domestic demand, the pace of credit growth and the terms on which people and firms borrow also matter.
Radev said central banks and supervisors should watch not only banks but also the risks from changes in the economic, legal and regulatory environment. If such changes hit the stability of banks, lending or the cost of loans, he said, an independent central bank should assess the effects and explain them publicly.
Radev said banks in Bulgaria are well capitalised and have enough spare funds. Loans are growing fast, mostly home loans, so the BNB must act early in its supervision and in the rules for the banking system. "The good results of the banking sector are no reason to ease the requirements," he said.