Serbia Monetary Policy September 2022

Serbia

Serbia: Central Bank continues hiking cycle in September

September 8, 2022

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.”

FocusEconomics panelists project the key policy rate to end 2022 at 3.77% and 2023 at 3.79%.


Author:, Economist

Sample Report

Looking for forecasts related to Monetary Policy in Serbia? Download a sample report now.

Download




Serbia Economic News

More news

Search form