04.10.2022

BNB ANNOUNCED A RECORD INTEREST RATE FOR OCTOBER

The Bulgarian National Bank (BNB) has announced that it will raise the basic interest rate (simple annual interest rate) by 0.49 percent from October 1, 2022. For the first time, the basic interest rate has been different from 0.00 since January 1, 2016, when it was 0.01%.

In the months before the basic interest rate became 0.00 it hovered between 0.02 and 0.04. The basic interest rate had a similar level to the one announced for October in 2009, when it was 0.55%.

The value of the basic interest rate matters, but only in some limited cases. Mainly the basic interest rate is used to calculate the penalty or statutory interest on late payment. The calculation is done by adding 10% to the base interest rate.

The basic interest rate is an instrument by which the value of a monetary unit in a country's economy is regulated and measured. Its amount is determined by the Central Bank. When the basic interest rate rises, it usually happens in a strong economy in order to balance it out.

The entral bank reduces its size when the economy is in difficulty and there is a need to support it. This is done in order to stimulate the withdrawal of loans and provide new jobs. Inflation is also regulated in this way.

According to Bulgarian legislation, the basic interest rate is not included in the calculations of interest by the Bulgarian National Bank when granting short-term or quick loans to commercial banks. There is an exception only in the granting of loans to commercial banks for a period of up to 3 months, subject to compliance with certain strict conditions.