Serbian town in the winter

Serbia Monetary Policy September 2022

Serbia: Central Bank continues hiking cycle in September

At its 8 September meeting, the National Bank of Serbia (NBS) raised the key policy rate by 50 basis points from 3.00% to 3.50% as it continued to tighten financial conditions to tame inflation. The NBS also increased the deposit and credit facilities by 50 basis points to 2.50% and 4.50%, respectively.

The Bank’s decision was again driven by “an environment of continued cost-push pressures and soaring imported inflation”. The NBS stated that the decision is expected to tame inflation expectations and thus second-round effects from greater food and energy prices. Core inflation has been somewhat stable due to the “relative stability of the exchange rate”. Furthermore, the Bank has also been pressured into continued monetary policy tightening as the U.S. Fed and the ECB have sent clear signals of higher interest rates ahead.

The NBS did not directly specify the future path of monetary policy, stating that the war in Ukraine, as well as the movement of major monetary and macroeconomic factors at home and abroad, will decide “whether there is a need for additional tightening of monetary conditions”. Our panelists anticipate that the NBS will continue to tighten in the face of persistent price pressures.

The next meeting is scheduled for 6 October.

Mate Jelic, analyst at Erste Bank, added:

“We expect the NBS will follow [the U.S. Fed and ECB] and continue to gradually tighten its policy despite relatively widespread fears of growth slowdown. Otherwise, they risk de-anchoring of inflation expectations and price-wage spirals. Any earlier hopes that this energy shock is temporary have evaporated with the recent shutdown of Nordstream-1, weighing further on household and business sentiment. We expect to see the key rate reach 4.5% by year-end, with more hikes in 1Q23.”

The NBS did not directly specify the future path of monetary policy, stating that the war in Ukraine, as well as the movement of major monetary and macroeconomic factors at home and abroad, will decide “whether there is a need for additional tightening of monetary conditions”. Our panelists anticipate that the NBS will continue to tighten in the face of persistent price pressures.

The next meeting is scheduled for 6 October.

Mate Jelic, analyst at Erste Bank, added:

“We expect the NBS will follow [the U.S. Fed and ECB] and continue to gradually tighten its policy despite relatively widespread fears of growth slowdown. Otherwise, they risk de-anchoring of inflation expectations and price-wage spirals. Any earlier hopes that this energy shock is temporary have evaporated with the recent shutdown of Nordstream-1, weighing further on household and business sentiment. We expect to see the key rate reach 4.5% by year-end, with more hikes in 1Q23.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest