Serbian town in the winter

Serbia Monetary Policy December 2023

Serbia: Central Bank holds rates again in December

At its 7 December meeting, the National Bank of Serbia (NBS) kept its key policy rate unchanged at 6.50%. It also held the deposit and lending facility rates at 5.25% and 7.75%, respectively. The decision marked the fifth consecutive hold and was in line with market expectations.

The Bank’s decision to stand pat was driven by a continued decline in price pressures: Inflation fell for the sixth consecutive month in October, coming in at 8.5%—the first single-digit reading since April 2022. Additionally, the NBS deemed that the full effect of prior interest rate hikes had yet to materialize. The Bank now sees inflation returning to the 0.5–4.5% target band in mid-2024 and reaching 3.0% by end-2024 on the back of monetary tightening, an anticipated further decline in inflation expectations and lower imported inflation.

The Bank’s communiqué was void of explicit forward guidance. The NBS reiterated that it would monitor both domestic and international inflation drivers and make decisions based on the inflation outlook, while trying to preserve financial stability and support economic growth.

The next meeting is scheduled for 11 January.

Analysts at the EIU commented on the outlook:

“We expect that monetary tightening has come to an end for now, with consumer price inflation easing at a faster pace. We expect rates to remain on hold for the next six months or so and that monetary policy will loosen from mid-2024 onwards. However, there is a risk that inflation will remain sticky and that rates will stay higher for longer.”

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