Serbia Monetary Policy June 2022


Serbia: Central Bank delivers unexpected hike in June

June 9, 2022

The National Bank of Serbia (NBS) delivered a 50 basis point rate hike at its 9 June meeting, bringing the key policy rate to 2.50%. The decision, which largely took market analysts by surprise as the consensus was for a hold, marked the third consecutive rate hike. The key policy rate has now been increased by a cumulative 150 basis points since the Bank commenced its tightening cycle on 7 April. All other monetary policy tools were left unchanged.

In deliberating its decision, the NBS pointed to a deepening global energy crisis at the hands of the war in Ukraine, and cited its impacts on global and domestic inflation as well as on supply chains. Moreover, the Bank opted to continue tightening financial conditions “in order to limit the second-round effects on inflation expectations and preempt a further hike in domestic inflation.” It left its inflation outlook unchanged, expecting a downward trajectory to commence in the second half of the year as the agricultural season calms food prices, and the effects of prior monetary policy tightening and measures to cap food and energy prices kick in. Turning to the economy, the NBS highlighted that high-frequency data pointed to resilient economic growth in Serbia.

While the NBS did not explicitly state the direction of monetary policy going forward, it indicated that further hikes are a possibility depending on the development of the war in Ukraine and subsequent price pressures. FocusEconomics Consensus Forecast panelists expect the NBS to continue its tightening cycle going forward amid sustained price pressures.

Mate Jelic, analyst at Erste Bank, added:

“Future monetary policy moves depend on the inflation outlook and given that the oil market remains very tight due to sanctions on Russian oil and OPEC constraints, we feel risks are tilted towards a longer than expected price squeeze. Bottom line, we expect at least another 50 basis point hike of the key rate by year-end.”

The next meeting is scheduled for 7 July.

FocusEconomics panelists project the key policy rate to end 2022 at 2.68% and 2023 at 2.92%.

Author:, Economist

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