Serbia Monetary Policy January 2022


Serbia: Central Bank holds policy rate in January

January 13, 2022

At its first meeting of the new year on 13 January, the National Bank of Serbia (NBS) stood pat and left the key policy rate unchanged at the all-time low of 1.00%. The decision was in line with market analysts’ expectations. Meanwhile, the Bank decided to continue to utilize other tools such as increasing the weighted average interest rate on reverse repos.

In deliberating its decision to leave the main policy tool unchanged, the Bank stated that the recent surge in consumer prices—inflation reached 7.9% in December—was mainly attributable to “factors beyond the influence of monetary policy”, such as global prices for commodities, energy and food. Furthermore, while the Bank expects inflation to remain near its current level in the first quarter of this year “under the impact of the global energy crisis and the consequently higher prices of imported products”, it should ease in Q2 and move towards its 1.5%–4.5% target range. Moreover, core inflation has remained manageable, in part thanks to a stable exchange rate. This provided the Bank with room to maintain its accommodative stance.

The Bank struck a largely unchanged tone in its press release, reiterating that it “will continue to carefully monitor movements in the domestic and international environment”. The majority of FocusEconomics Consensus Forecast panelists expect the Bank to begin a hiking cycle this year to rein in inflationary pressures amid a continued economic recovery.

The next meeting is scheduled for 10 February.

Analysts at the EIU added:

“We expect a first rise in the key rate by mid-2022, with the NBS gradually tightening its policy stance into 2023 amid a moderately firming trend in underlying demand. However, with inflation remaining well above the NBS's upper target in the coming months, and widening yield differentials weighing on the dinar (and the stock of foreign-exchange reserves), an earlier rate hike is possible if core inflation picks up.”

FocusEconomics panelists project the key policy rate to end 2022 at 1.67% and 2023 at 2.17%.

Author:, Economist

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