Interest rate risk of central banks in Central and Eastern European countries and its impact on profitability and credibility in a turbulent socio-economic environment

<ns3:p>Interest rate risk management at central banks is subordinated to the achievement of macroeconomic monetary policy objectives. However, interest rate risk can materialise and result first in a deterioration of profitability and then in a loss of credibility for the central bank. The primary objective of this research article is to evaluate the diversification of interest raterisk levels among central banks in selected Central and Eastern European (CEE) countries and the repercussions of these risk levels on the financial performance and credibility of these institutions.The analysis covers financial data from 2018 to 2023, a period of significant socio-economic upheavals, including the COVID-19 pandemic and the war in Ukraine. The influence of unconventional monetary policy instruments on market risk levels is also examined. Panel data analysis using linear regression dynamic models confirms that the scale of interest raterisk significantly affects central bank profitability in selected CEE countries. Moreover, profitability levels have a significant impact on institutional credibility.</ns3:p>