Overly expansionary fiscal policy may de-anchor inflation expectation and further fuel inflation. So far, some of the central banks have "looked through" these supply side factors, while others, where labour markets have been tight and economy has been gaining steam or inflation expectations have risen, have already started the tightening cycle. The tightening of monetary policy in the advanced world may lead to headwinds for EMEs that may well have no choice but adjust their monetary policy stance. Not doing so risks capital outflows and currency depreciations, further fueling inflation. Emerging Europe already witnessed 300 million $ outflow since the beginning of the war, though it is far smaller than in March 2020 when they amounted 1.7 billion $ While calibrating monetary policy, we also have to be mindful of the price effects of some structural forces such as green transition and globalization, which may put upward price pressures. In the past, globalisation enabled rapid trade integration of many countries, lifting up their growth potential and putting persistent downward pressure on inflation. Now, with globalisation under threat, price pressures are upward. Overall, in an environment of rising inflation and limited policy space, blanket support should give way to more targeted and time bound policies, and even more importantly shift the focus back to structural and transformational policies, which are key for lifting the growth potential and building resilience. The latter is particularly relevant for the countries in the region that are faced with slow real convergence and stagnant growth potential.

Anita Angelovska Bezhoska: Speech - National Bank of the Republic of North Macedonia 8th Research Conference Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the National Bank of the Republic of North Macedonia 8th Research Conference, co-organised with the European Investment Bank, Skopje, 28 April 2022. *** Respectable Minister of Finance, Mr.Besimi, Governors and central bank board members, VP of European Investment Bank, Ms Pavlova VP of European Bank of Reconstruction and Development, Mr.Bowman, Alternate Executive Director of IMF, Mr Dresse, Representatives of IMF, EIB, EBRD and BIS, Representatives of the banking sector, Representatives of academia, Distinguished guests, It is my great pleasure and honour to address you at the opening of the Conference co-organised with the EIB. This conference holds a special meaning for us. It marks three decades of monetary sovereignty, denoted by an independent central bank and stable national currency. It has been a long journey requiring a lot of efforts, knowledge and courage to withstand many turbulences. We have confronted many mountains at the very beginning of the transition in particular. However, as it is said "No matter how high a mountain you think has come in front of you- take small steps every day and you will eventually reach its summit''. Indeed, continuous prudent steps have resulted in a long-lasting delivery of low and stable inflation and exchange rate, as a foundation for the overall macroeconomic stability. Unfortunately, at this very moment we have once again faced new challenges, i.e.