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Serbia Monetary Policy August 2023

Serbia: Central Bank keeps rates unchanged in August

At its 10 August meeting, the National Bank of Serbia (NBS) kept its key policy rate unchanged at 6.50%, along with the deposit and lending facility rates, which remained at 5.25% and 7.75%, respectively.

The Bank’s decision followed the moderation of both headline and core inflation during Q2, which decelerated in June to 13.7% and 9.9%, respectively. The Bank noted that global price pressures have eased and that it expects domestic inflation to “remain on a downward path and return to target over the monetary policy horizon”.

Looking ahead, the Bank’s forward guidance was tilted slightly to the hawkish side; it did not rule out further rate hikes. That said, it also acknowledged the lagged effects of previous hikes. The Consensus is for a small rate cut by the end of the year, although opinions vary considerably.

The next meeting is scheduled for 7 September.

On the outlook, Nicolaie Alexandru-Chidesciuc from JPMorgan, commented:

“Considering the strong external position (basic balance [the joint capital and current accounts balance] reached a record high EUR3.1bn in May on a 12m basis), and the dovish shift among regional central banks, we think the board is happy with a terminal rate of 6.5%, despite not formally ending the hiking cycle.”

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