Central Bank tools for affecting the dynamics of mortgage lending in the conditions of a currency board and inflation environment

It is the goal of every central bank and government to keep prices stable. To this end, the object of its money supply management policy is to keep inflation-the rate at which the prices of goods and services change over time-always low, sustainable and predictable. The Bulgarian National Bank's (BNB) target is an inflation target of 2% in the medium term as a criterion from Maastricht and the upcoming adoption of the euro as the national currency. Additional limitations are the conditions of the currency board as a system that determines the possibilities of the central bank for interventions. Inflation as a process creates a sense of increased risk of loss of value, which leads citizens and economic agents to seek long-term sustainable investments. As a result, the demand for mortgage loans has increased. The level of inflation today can affect people's expectations of price developments in the future. If consumers and business owners form their policies with very low or very high inflation, they have an expectation that it will stay that way. These expectations are important. Citizens use them when making decisions about spending, borrowing and investing. Firms also consider these expectations when pricing their goods and services. When these expectations move away from the central bank's inflation target, it becomes very difficult for it to direct real price dynamics in the economy back to this target. The central bank can contribute to avoiding the creation of such expectations by having a clear target and keeping inflation close to it, using, albeit limited, its influence in such conditions. To study the development of these important macroeconomic variables, the methods of econometric analysis based on time series were used for the dynamics of inflation expectations of citizens, inflation, the instruments used by the central bank for influence and the dynamics of mortgage loans granted to citizens.