Croatian Central Bank (HNB) Governor Boris Vujcic said on Wednesday in the Croatian port city of Rijeka that inflation is expected to decline steadily until the end of the year.

Vujcic participated in a central bank governors’ round table at the Faculty of Economics in Rijeka on the topic of “Monetary policies and small open economies in the vortex of high inflation”, which was part of a meeting of regional bank governors.

Addressing reporters, Vujcic said that inflation has already started to decrease, primarily due to the reduction of the base effect of the increase in energy and food prices triggered by the aggression against Ukraine. Core inflation and inflationary pressures remain, which are quite strong, he said.

Vujcic highlighted maintaining financial stability as one of the challenges facing the central bank. Croatian banks are very well capitalised and liquid and have significantly higher average liquidity and capitalisation than the EU’s, Vujcic noted, adding that Croatian savers can be absolutely safe.

He assessed that a banking crisis in the EU and spillover to Croatia are not expected. The events at Credit Suisse and the US Silicon Valley Bank are crises within those banks that do not have the characteristics of a banking system, he said. In Silicon Valley, 54 percent of total assets were in government bonds, which is very uncharacteristic of the banking system. As regards Credit Suisse, it has had problems for a number of years that have culminated now, Vujcic said.

Asked if interest rates will rise, he said that it was agreed to collect the necessary data by the next meeting of the Governing Council of the euro area in May, when interest rates will be decided. Inflationary pressures still exist, and if they persist until May, an increase in interest rates can be expected, he added.

Vujcic assessed that the extra profit tax that some banks will pay will not affect their stability.

Speaking about the rise in real estate prices in Croatia, he said that the causes were initially very low interest rates and the possibility of borrowing, and secondly low deposit interest rates, which encouraged some people to withdraw their savings and buy real estate. The situation has changed now, but due to the switch to the euro, part of the money went into real estate before the conversion, while now the entry into the euro and Schengen areas certainly has an impact on the attractiveness of the real estate market, Vujcic said.

Today’s meeting at the Rijeka University Faculty of Economics was also attended by the governors of the central banks of North Macedonia, Bosnia and Herzegovina, Slovenia, and Montenegro.